Get ready to reload shorts

I know that a dollar earned on the long side is every bit as valuable as one
earned on the short side, but somehow, the short side always seems sweeter.
That’s because it is usually earned by bucking the crowd. So last week was
particularly sweet for me as I had closed all my longs and increased by QQQQ
short. This in anticipation of a market top that I’ve been calling (prematurely
as it has turned out) for some months now.

Now perhaps the top is finally in and the crowd is in a quandary. For several
years now this crowd has been unexpectedly in control — despite economic
fundamentals that consistently have loomed as dark clouds on the market horizon.
You know the list: oil and commodity price shocks, Fed rate hikes, budget and
trade deficits, and a steadily shrinking dollar.

Nothing really changed last week — except the direction of the momentum. No
doubt the triggers were the parabolic rises of a number of sectors as retail
investors piled on to the speculative heap — and now lay with their bars (and
stocks) of gold and silver and energy companies bleeding like the naïve stuck
pigs that so often retail investors are.

The week’s major reports don’t hit until mid-week. My top pick for market mover
is the GDP revision for Q1 on Thursday. The first report had it at 4.8%, which
is well above sustainable potential output and inflationary. However, some
analysts are calling for a whopping upward revision to 5.8%. If it comes in
anywhere near that or above, this will further fan inflationary and Fed rate
fears.

On Wednesday and Thursday, we get new and existing home sales, respectively.
These reports have become largely irrelevant as the market has clearly accepted
a declining sector. The only issue here in the coming months will be an evidence
of a sharply bursting bubble as opposed to a semi-soft landing.