I don’t have time to write a lot now, so this will be brief. I may update this post later, so be sure to check back.

Basically, I’m looking for a replay of the XLF chart. When XLF approached the March low, it snapped back viciously to shake-out all the late-coming shorts and rallied for 3-4 days before resuming its descent. SPY should do roughly the same thing. There are a lot of late-coming shorts piling on now, and SPY is within striking distance of the March low, so we could see this as early as Friday.

Smart-money shorts will see huge profits on their screens, and will begin to take them. The shorts with the biggest balls will even go long. That will start the short squeeze, and since the market is so over-sold, the dead-cat bounce could run for a few days.

I have huge piles of SDS, QID, TWM, SKF, SPY puts, and QQQQ puts, and I may take a few more profits at the March low. Then again, just in case this things snaps completely, I might not. I have some cash on hand to short the peak of the expected short-covering rally, so I may not temp fate. But you get the idea, right?

At 3:30pm, I sold a small number of my SPY puts. I bought them at $3.55 three weeks ago, and sold them at $10. So, that was almost a triple, and the annualized rate of return is some insanely huge number.

The market is rather dramatically over-sold here, so perhaps it can manage a dead-cat bounce soon. I wanted to have just a little cash on hand to fire into any potential rally. I am still leveraged short with less than 10% cash.

With oil falling almost 2%, you would think that the S&P 500 could muster more than a 0.58% rally – especially during the quarter-end “mark up” period, but it couldn’t. Rather lame, don’t you think?

And did you see Jim Cramer during his “Stop Trading” segment on CNCB this afternoon? He was shot out of a cannon! I had no idea what he was babbling about, but it doesn’t take much to get the bulls excited these days. That’s how you can tell that the bulls are really suffering, and running on nothing but hope. Eight points on the S&P 500, and they are breaking out the champaign. Ridiculous.

On Monday, I wrote:

“Maybe the XLF can mount a throw-back rally up to the March low, where I’m sure it will be rejected.”

…and that is exactly what happened today. A rather dramatic pop-and-flop, no?

The bears are just pouncing on any sort of rally…

The model that I use is now showing that the S&P 500 is more short-term over-bought than it has been in several days. So, I bought some August $132 SPY puts. The trade was just before noon, and the price I got was $3.75. The last bid today was $3.90, so I already have a profit.

The model did not say that the NASDAQ-100 was over-bought yet, so I didn’t pull the trigger until just before the close. Today’s mark-up rally was so sloppy that I just couldn’t resist. I bought some August $47 QQQQ puts for $1.57. The last bid today was $1.62, so that trade is in the green also.

I used about 50% of my remaining cash. I will be keeping my eye on IWM and XLF puts as the month-end mark-up rally continues with the goal of having every penny short by the end of the month.

(Note: This post was updated since I first posted it around noon.)

The mark-up elves were hard at work today trying to paint the tape a pretty green color for their end-of-quarter results, but took a bit of a beating. Things were going well until oil began to creep up in the afternoon. I found it amusing watching them try to keep the short-squeeze going with their buy-programs.

In the end, they were only able to keep the major indices from being a route. They won in the financial sector since that is where there was the most shorts to squeeze, but even that was a close thing as the XLF almost flopped over in the afternoon. And though they tried to hold up the IWM, they took a major beating there, though of course, the Russell 2000 doesn’t make headlines, so that particular piece of ugly news won’t reach the investing masses.

Will they be back to try again tomorrow? I don’t know. It takes a lot of capital to run one of these mark-up squeezes, and if you can’t turn around and dump stock on the traders that you suck in and squeeze out, you might be looking at some serious losses instead of the usual slam-dunk profits. But perhaps they saved their biggest guns for the FOMC announcement. I sure hope so, because I really need that one last rally so that I can deploy my 17% cash to the short side at attractive prices.

On CNBC today, the anchors were reading some fresh BS off of their teleprompters: “The Dow is up double-digits!” A rather odd way of stating things when the Dow is up a couple of dozen points, don’t you think? If I didn’t know any better, I might think that they were trying to assist the mark-up elves…

Finally, somebody in the financial press is agreeing with me on an oil breakout. In the Columnist Conversation at RealMoney.com, Alan Farley wrote (at 4:54pm):

“Crude oil is setting up for a -very- big move. The US Oil Fund (USO) posted a NR7 inside day on Tuesday, in its 14th session within a tight consolidation pattern.”

As Farley mentioned, it looks like oil traders are geared-up for lovey-dovey talk from the FOMC tomorrow, which would sink the dollar and launch oil. The mark-up elves were also trying to steer the momentum for a stock rally on dovish talk, but they didn’t have as much luck as the oil traders.

I have a lot more to say, and a lot of correct predictions to crow about, but I have a cold and am about to flop over here, so let me start to wrap up. A few days ago, I pointed out the bear-flag pattern on the IWM chart, and said that the IWM was toast. Take a look at the IWM chart now; it’s a wreck! That was the last of the major indices to crack. My TWM did well today.

And finally, Jim Cramer is baffled:

“It is that kind of nasty market. No rhyme and no reason.”

No reason!? All I can see are reasons! The world is clearly ending! You can’t even count the reasons! Cramer’s attitude is an indication that the bulls have not even begun to contemplate capitulating, and that means that there is lots more room on the downside. The Vix actually declined a percent today!