The market has been offering a few clues about a possible pause in the rally run we have had over the past 4-5 weeks. The financials have been a leading sector and I wanted to point out a few things.

As I discussed in our AM Meeting, there seemed to be a blow off top in the XLF and IYF yesterday on the open. It may not look so on the chart but after following the dopey ETF for 3 weeks it seemed a bit different to me yesterday morning. FAZ which we also traded for about 3 weeks straight, appeared to change and I found it to be hard to make easy money on the shorts below $10-11. GS reported last night, had a nice little pop but closed quite bearish after hours. It is no surprise that after opening much lower than the prints after hours that the stock closed near the low.

Tomorrow should be a very decisive day for the bulls. I think after the selling today there should be some follow through on the downside. I would like to see a bit of a gap up with a failure on the open at some resistance to initiate core shorts on a few stocks. But there is also the possibility that we may just tank right on the open. The bulls may just throw the towel. Either way I will be looking for more clues in the level II that will allow me to capitalize on this possible turn.

We pointed out some really good levels on the SPYs and IYF in our AM meeting today. In fact, we were right on point if I may say so. For tomorrow I will be looking at that 38 level in the IYF closely and SPYs at 84 for critical support levels. Holds above 85.2 on the SPYs will get me to give up on the shorts.

The clues are there, it is time to come up with a well thought out trading plan and execute. Remember that there is plenty of room on the downside. Even after todays sell off we are still quite overbought. The easier money should be on the short side. Get some rest everyone. Tomorrow should be a fun day. Giddy up!

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