Wednesday, June 21, 2006
There is some indication that the bond market is close to bottoming and a potential rally could ensue. This would probably give a boost to the weak market giving us a tradable rally. S&P options traders have already become overly bearish, indicating a bottom is near in the big caps. There remains a disconnect with the QQQQ however as options traders are fairly complacent still and betting a little too heavily on the long side. There remains an open gap on the QQQQ at $37.65 so it is likely that we will see one more plunge before a real floor is in place. Hopefully a plunge back to the lows will inspire enough fear and bearishness that real capitulation can take place and we can then finally put this downtrend behind us.