Shorts can stay solvent longer than you think

Chanos made good money shorting Chinese stocks since 2010.

Chanos in Bloomberg

The Chinese stock market's performance over the last few days is insipid and uninspiring to say the least. While global markets rose anywhere from 15 to 20% in 2 weeks, SSEC's gain was limited to 3%.

Short sell FXI on a SSEC break of the October lows.

Technology not confirming the rally

Boom Boom Tech not confirming this rally. When was the last time that all of QQQ, AAPL, GOOG, INTC, MSFT, IBM underperformed the market. They don't have to outperform the market every single day but on a day when market is rallying hard, they should be outperform the market. 

Having said that, I don't believe this is the time to sell short. I believe I see the market higher than today in 2 weeks, 1 month time. Before that, there could be corrections. That means this is not the time to buy either. You don't want to buy at the top, just in case this is the top.

Hanging Man

I posted this on 10/16/2011.

1, Market followed in a textbook fashion till now. We had a lower low towards 1187 and then we hit 1257. Where from now? The market is still in a uptrend, till the next sell signals arrive. Don't be early to sell short.

2, VFC: It looks like the channel held VFC back today. There have been several attempts to break above, albeit unsuccessfully. What do you call the candlestick today? Hanging Man! I feel comfortable selling short here with a proper stop. Tomorrow should bring us confirmation of the hanging man patten. Tomorrow should also bring us AMZN's earnings results.

VFC daily chart here

US Dollar Index

The US Dollar index is definitely in a bearish trend. For now, the 50 DMA provides support. US Dollar index is a risk off trade, and is inversely correlated to the US stock market. I expect the 50 DMA to break next week and the 200 DMA should give good support. Will 200 DMA hold? The MACD is turning down which indicates the continuation of the trend down. The histogram also ticked one down than the day before. For the MACD to turn up again (to turn this chart to bullish), it will take atleast few days time. Meanwhile, the candles should bounce on the 200 DMA. There is also the previous breakout support at ~ 75. If the 200 DMA doesn't hold and the MACD continues downward, then it is ultrabearish for the Dollar index and uberbullish for the market. You can also note that Eur/USD is just pips away from the upside resistance. Both these currencies can play pingpong in a small range for the next few days, and markets will definitely take it as positive.