The implied 400-point Dow rally (see inset) seems somewhat ambitious as a target for getting us short, but it still looks like the easiest opportunity for high leverage that’s likely to come our way over the next week or so. We should be alert nonetheless to the somewhat unlikely possibility that the top made last week at the midpoint resistance (red line) was bulls’ final hurrah. Whatever the case, the one-size-fits-all trade we should use to bet on the bear would entail legging into 1- or 2-point vertical bear spreads at zero cost with DIA trading near the 173.52 rally target. This will require our close attention, since we’d need to catch a swing high intraday to succeed. If you’re interested, stay tuned to the chat room this week for timely details. ______ UPDATE (July 16, 6:24 p.m. EDT): Based on yesterday’s close, I am still in love with the 173.52 rally target. It looks very likely to be reached, and precisely. A pullback to the 170.52 midpoint pivot could be used for belated buying. _______ UPDATE (July 30, 2:52 p.m.): The love affair has cooled, since this vehicle has failed miserably to sustain altitude above the 170.25 midpoint resistance. This adds to the evidence that the stock market’s broad topping pattern may be entering its initial downward phase.
