If you followed my recommendation, you're entry into the bearish Rydex Tempest Fund (RYTPX) at the close yesterday came at $49.39.
This fund is designed to give 2 to 1 leverage -- on a daily basis, not a cumulative basis -- on the inverse performance of the S&P 500. If the S&P 500 goes up, this fund goes down at twice the rate, each day; if the SPX goes down, this fund goes up at twice the rate.
The good news on this position was that Thursday was not a big sell-off day, and we got a decent entry close to the recent highs. I guess the bad news is that Thursday's action also did nothing to definitively suggest that this uptrend is finished. But at least there wasn't a dramatic sell-off, which is always a distinct possibility when I recommend going short at the close.
There were a few developments suggesting this position will work out, even though it seems vaguely suicidal to be short now. Again, it's my feeling that when things look this rosy, and bulls are this cocky, you've got to at least stake out a small position or know that you could miss the very quick and nasty correction that such sentiment almost always brings about.
Some of the high-flying speculative Nasdaq stocks really took it on the chin yesterday. This left the daily Nasdaq chart with a bearish "outside down day", where the index made a new high, but ended up closing at the low -- and below the close of the previous day too. That's generally a reversal sign, showing the market may have finally hit a speed bump on this fast move up.
It also looks like the Nasdaq has finally stopped its end-stage parabolic ascent, and is now on the backside of its parabola, which is a very dangerous place to be.
The key to such potential reversal signs is follow-through. If the market quickly rejects that potential reversal candle, and starts pushing back up, then we may have again just seen the little hiccup the market needs to turn around and keep on truckin' higher.
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