When looking at recent price action, it is difficult to remain bearish on a short term basis. For sure there are a lot of problems in the economy (China is slowing down, Europe is in deep recession, US ISM Manufacturing index is going below 50, ...) but when looking at price action, it looks like nothing can stop this market on a short term basis.

I fully agree that markets are playing a dangerous game and that it will probably end with a sharp decline but don't forget what happened between October 1999 and March 2000: Markets can remain irrational longer than you can remain solvent...

We believe it is too dangerous to go against current momentum, so we continue to track our indicators.

Looking at the Sigma Whole Market Index, we can notice that the market is testing an important horizontal resistance. If the market is able to move above it, another rally is probably on the agenda.

The Sigma Trend Index surged from '-4' to '+97' and the Trend Level (TL) moved from '3' to '5', telling us the market is overbought on a short term basis. The Power Level (PL) is at '5', telling us that today's move was very powerful.

Nevertheless, we don't expect any major pullback from current levels (on a short term basis).

Looking at the Breadth Index, we can notice that the negative divergence that was in place for a couple of weeks was cleared in today's session. So, as long as the market doesn't reach euphoria level, it can continue to climb.

Conclusion:

We remain bearish on a fundamental basis and on a medium term basis. Nevertheless, on a technical basis, the short term picture looks bright. It looks like the market is testing Central Banks: "If you don't want to be responsible of a crash then give us all the liquidity we need..". And it looks that in an election year nobody wants to be responsible of a crash, so Central Banks are giving all the liquidity that markets request...

2013 and 2014 will probably be dramatic but nobody cares about this because it will be after US presidential election...

All our pending orders were executed during Thursday's session. We had those new positions to our short term positions.

For those of you interested in our intraday move, you can visit our site during the day: we post all our trades in real time. You can also subscribe to our twitter account (@SigmaTradingOsc), it is free and you are updated on our latest view/trades.

Short term positions:

• long 1.5 SPX at 1425.81
• long 1.5 NDX at 2802.52
• long 1 CAC at 3477.93

Medium term positions:

• short 2 SPX at 1336.99
• short 1 NDX at 2578.46
• short 1.5 CAC at 3103.87