Bear market rally or get bullish

Market is still bullin big time. I am thanking my lucky stars that I have stuck to the system rules so far. I was forced to take profits in Freddie Mac on Monday even though I wanted to make more $$$, but system required the exit point. The expected additional profits have not yet materialized and it looks like I unloaded some contracts at the low of the day. This is great and is helping to build a little more confidence so that I will be able to probe again soon.

Top picks to start the shorts again - PHM, CFC, FRE, FNM, FED, AVB. I think the charts for AVB and FED are still way too bullish and I will hold off there until later this summer or fall most likely. However charts for PHM, CFC, FRE, and FNM all appear to be in bear market already. PHM especially is making a significant rally back to the 200-day moving average. If you look at the relative strength index it shoud be peaking above 80 by the time that PHM approaches the 41 area. It is in that target area that I would like to add the position. I am looking at the April 2006 $42.50 puts. They might be trading at that point around $1-2 which would give an attractive leverage ratio as well as risk / reward potential. The price movement I am anticipating is a touching of the 200-day MA or maybe even a false breakout followed by a decline back into the Mid-30s. We have another week or so for the price pattern to materialize so lets see what happens.

Here is the chart:


Best regards,

BG