I have been publicly Bearish for months, but now it has finally become clear that we have entered a new Bear market. But after a steep sell-off last week, we had one of the biggest 1 day rallies I can remember in recent times after a EU bailout was announced. This was enough for me to predict a short-term rally would continue for at least a few days, but alas it looks like I may have been premature in that call. As I write this, the futures market is down about 0.5% just hours after a 3.5% rally. A scan of the blogs and sites I follow indicate that the smart money is not fooled by this bailout and the subsequent rally. Europe’s problems are far from solved and in fact they are just beginning. Although we did not yet break the 200 day moving average, I believe it will happen in the next few weeks. Once that happens, all bets are off on how low we can go.
We have just entered the beginning stages of a Sovereign Debt Crisis, which started with Greece, but will ultimately end in the United States (through a collapse of the U.S. dollar).
Brace yourself. It’s going to be a wild ride.
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