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Defcon 3

Ready your firearms;  the bears are now testing the first defense line for the bulls.  If they succeed;  then, price will further plunge into territories that are still bullish (as far as a major pullback is concerned) but will be considered by short-term bears as their rightful place.

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But of course;  it is far safer to assume that the Major Pullback expected by many traders and investors is already on the way since the SnP500 was able to reach the 1292-1323 target range for the 5th wave (see previous charts for SnP500 target ranges) with the 1300 as a Major Resistance. 

Playing Safe is the better part of Valor.

As promised, I sold the last 1/2 SSO (bought last Jan 07) when SnP500 reached the 1300 objective last Thursday.   I also started buying SDS on Thursday and Friday to hedge my portfolio and am now short the ES at 1295.50 early morning Friday while pictures of Egypt Chaos was playing on CNBC -  Just In Case the problems in Egypt got worse than expected. 

Finding new entries for shorting the markets will become more apparent IF the major indexes CANNOT make a credible rally this week.

Major Short-Term Support for Dow Jones is 11,750 and 1262 for the SnP500 if they keep going down in the next few days. 

IF SnP500 breaks hard below 1259, the bears will start to have the upper hand (short-term) then I would be starting to expect another Major Pullback similar to what happened in April to July 2010 and potentially another Flash Crash.

There was an early warning of an impending "disaster" of global consequences when Gold suddenly made a rally last Wednesday while the US$ was stationary.  I went long GLD last Wed but got stopped out at B/E the next day then bought GLD again in Friday.

There is also a palpable resistance by many traders and investors against panicking based on external events after the US suffered schizophrenic panic selling caused by the PIIGS problems in May to July 2010.

This time around;  bad news for the world is good for the US of A since Global Investors will be more afraid to invest in troubled spots (such as the Emerging Markets) and will be going back to the safe and stable hands of Uncle Sam.

Let's see how the Obama Administration plays this out. 

Great opportunity if the US can show the world it has not lost it's former magic completely (and/or has not gone completely loco).