Monday trade drove home the point that most market participants are largely wrong footed — that is too bearish — and that is why Monday afternoon produced a short squeeze, even on top of last week’s massive short squeeze. I think the only chance this market has to go lower than the recent swing low 7 trading days ago, is if it goes higher first and forces all the shorts out. If we go moderately lower from here and consolidate the recent gains — which I think is probable— then the low for the rest of the year is in.

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After a 200 plus point rally in the SP 500, a 30-50 point consolidation will provide an opportunity to find some attractive candidates. I will be looking for stocks with good earnings, and the second category I will be looking for is stocks with a high short interest ratio. I will put together a list for tomorrow. This may well be a case that the market has to go up to go down, but I only see any eventual down coming from higher levels.