3/9 Daily Commentary

Model positions:
SDS full 5% capital basis 32.83

SKF 4.5% capital average basis 21.11
DXD half 2.5% capital basis 27.99

Short silver
ZSL 1.5% capital basis 4.22

Plenty of room to expand both short stock and short silver positions.  Waiting for break of support in both markets.  March S&P futures decline below 1131.75 will be a trigger.  I  will provide additional short stop levels tomorrow.  Silver short level is based on the closing price of its 90-minute 110-unit M/A below 16.94.  This level will move up throughout the night.
We had back-to-back smoke-and-mirror days.  Yesterday with Greece, today with Cisco.  I was set to add short positions when XMI went below 1164.20 but I held off because Nasdaq was taking off on the rumor of a breakthrough product. Nasdaq was up strong until the S&P failed to confirm its highs.  S&P peaked 1:15, Nasdaq peaked 2:00.   S&P, DJI, and XMI all produced corrective, not impulsive moves up.  S&P futures did not exceed their January high.  False rally.
Here is the S&P as it approached its high with 2 ABC moves:

Here is what happened afterward:

The DJI followed the same pattern, with nominal new highs being part of ABC chop.  The Nasdaq was the only impulsive market.
Amazingly, the XMI held back all day and did not come close to its high yesterday.  No need to label the waves, but it is a correction of yesterday's decline and actually pierced today's early low:

There is now an army of small speculators long over-the-counter stocks.  They all believe that the sell-off in the stock market is just normal profit-taking.  Not the case.  This is how tops are made, nominal new highs in one or more indices, hype for a "new era" like today's early hype that Cisco had a product that would "change the internet forever".  Bullish people spin bullish headlines and draw bullish speculators into the fray.

The I1 is on a down cycle into at least 3/19.

Tonight I will watch Mar S&P futures for a break of 1131.75, today's early low.  If this is broken I won't even think about it, I'll buy more short ETFs on ARCA (another 5% position).  Next decision level down is S&P cash 1133.80.  The 54-SMA is at 1140.21 minus .58% give 1133.80 as the sell level:

Here is the current I1 chart.  Notice the price bars; they are S&P futures.  Today's rally did NOT generate new highs in S&P futures.  The I1 is in a declining phase as per the chart:

So, if I have such supreme confidence in the I1 why wait for that much weakness to fully commit? I learned early on not to catch falling arrows or stand in front of rockets. However, by waiting for support/resistance breaks I would natually do the following:

a) I would move the points further away from the market to be really, really sure

b) The further away I moved them the more I was fearful of violent reactions,  just as I was in the trade.

With I1 I can sell strength confident that any adverse move would be smoke and mirrors.  I learned how to tell impulsive from corrective moves which did nothing except verify that in 95% of the cases the I1 had the orthodox high picked correctly.  With this in hand I already have positions as the market approaches trigger levels and I can draw the lines in the sand and execute them without fear because I already have profits at that point.  Know thyself and psychologically this is the way that I earn consistent profits.