Waiting for the short

I believe the market is beginning a pullback. Stock price action has not agreed with reality for the past few months – the fundamentals of the economy are simply not strong enough to warrant the 15% rise off of the June bottom. The looming fiscal cliff, the inability/unwillingness of banks to lend their capital, and the general global recession have taken their toll on U.S. businesses, yet stock prices are rising. 

This cannot go on. However, I am aware of the old adage, “The trend is your friend.” However Friday established a “hammer” formation on the candlestick charts, a signal of reversal, and today’s downward move signals that I may be right. I am probably going to enter the trade if tomorrow’s market action confirms we are in a downtrend. I will probably use a tight stop to limit losses if I am wrong, but I believe the market will fall at least to the 1300 area.

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