https://www.tradingview.com/x/MQo7jSwz/

Thanks for the response Randy. As usual – very thoughtful.

I often say: At just about any point in time, I can talk for hours, making either a bullish or bearish case on just about anything, including the stock market. Nobody can argue that high short interest doesn’t prove to be fuel for a short-covering fueled rally at times. However, just as oversold isn’t a buy signal and can become more oversold or stay oversold for an extended period of time as a security continues lower, elevated short interest can become more elevated or stay elevated.

So yes, certainly a valid point & if the market can hold the key supports just below & then make a solid pop above the trading ranges, then we could see a sharp short covering rally.

First thing that stood out to me from the case this article made was the fact that, right now, the short interest metric used on that chart (attached) is EXACTLY where it was when the Nasdaq 100 peaked in late ’21/early ’22 & started the biggest (37% drop) and longest (11 months) bear market since the Great Recession bear market from Oct ’07 – late ’08 (NDX)/early ’09 (SPX). Maybe he should have spoken to that for a little context

I’ve also included a chart of SPY, which tells a different story (short interest very high around the previous market peak, very low now. Either way, let’s see which way these trading ranges price & whether or not those breakouts stick or prove to be whipsaws.

You know the saying: Failing to plan is planning to fail:

Have a trading plan in place & be ready to act fast, should things develop quickly. That plan should include what, why, & when you plan to buy (or short)…including any current positions you plan to add to or close out, depending on what happens; How much (position sizing for each position); Your price target(s) for each position, if your analysis proves correct, and where your stop(s) will be, if not.

One thing to consider is what to do if we get what looks to be solid sell signals on many key indices & sectors but those are followed by a strong reversal back well-above the breakdown/support levels. Many variables will come into play at the time, should that happen, & I will share my thoughts at that time.

Remember, nothing is set in stone. The markets can & will do what they want, when they want to. We can only plan ahead on how we are going to position (or not), & react accordingly. With that being said, I still think the R/R is skewed to the downside & warrants a net short positioning (within a larger, diversified swing trading portfolio), adding if & when the case for a much bigger drop continues to firm up.