I am surprised by the action in the UltraShort Financials ProShares (SKF). Why? I was mentally prepared for the SKF to open higher, make a new high for the upmove off of Friday morning's new bear market low, and then retrace a larger percentage of the initial upleg (16.68-18.59). The actual price action was not all that dissimilar from my expectations: a marginal new high at 18.59 followed by a plunge to 17.69. What surprises me is the subsequent rally that appears headed for another test of the 18.50/60 area. After all, tomorrow morning (pre-market), Goldman Sachs (GS) releases earnings, which everyone expects to show blow-out (positive) numbers. Shouldn't such an eventuality scare the shorts in the banks (trigger a sustained decline in the ultrashort SKF)? So far, the SKF is holding up extremely well, which leads me to a preliminary conclusion that the earlier weakness today represented a completed correction of Friday's advance --ahead of a new upleg that is approaching in the upcoming hours -- regardless of the reaction to GS earnings.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.