Nail biting time for markets. Selling not done in my opinion. The bounce after touching a 10% correction a couple weeks ago was simply the hedge funds all programmed to buy at a 10% correction. Amazing what a few hundred billion dollars in program trades can do to turn a market on a dime.
Smart shorts did not blink. I blinked 50% covered some shorts, sold some puts etc. However, with the quick rally to 13,400 I was back in short mode. This market must close in the 12,000 range on the Dow for me to even think we are finished with the selling. More like it would be a 1987 type of rout. If we see this happen then some scales will tip, some real money lost, some of these complete idiots leveraging 20 to 1 to buy debt instruments will go away and some normality can return.
However, I fear no quick recovery in real estate, continued attempts to bail out funds and credit markets and a slow painful spiral down over many months that will begin to erode the savings of many soon to be retired boomers. The bail out attempts of course will have the same effect as the attempt to bail out the Ruble in the 90's. Send a few billion here and a few billion there and it works through the system quickly covering the losses of the most well connected and the banks. The rest are left to fend for themselves. The only question is, how do you make money in this scenario?
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