Crucial week

Next week will be a critical week, with lot of data coming in and major indices sit close to their 50MA, S&P500 is just below, and Dow, Nasdaq just above 50MA.

Three cases to play out:

1. Rally without testing 1490. One possible script is the market gap down on Monday, then it's possible an opportunity to close short, market likely will rally back for the day and rest of the week. I expect the rally may take us to all time high, but won't go higher from there. Bulls are running out of steam.
2. Testing 1490. If the market move down gradually on Monday and close at the low, then we can expect a test on 1490 on S&P500, which will bring Nasdaq and Dow to its 50MA if not lower. Market can hold and then have a small rally; then go down from there.
3. Break 1490. If the market break 1490 on Monday with huge volume, then I expect a straight down to 1460 before we can talk about any rally.

COT:

1. I checked recent COT on S&P500, Dow, Nasdaq and ES(S&P500 e-Mini), the latest data are on June 19th. The first two are bullish, while the last two somewhat bearish.
2. COT is bullish if commercials increase its long or cutting its shorts.
3. Large speculators used to have great track record, but they're on the wrong side in recent years.
4. What strikes me is, we have commercials increase its longs and large speculator increase its shorts on June 19th's S&P 500 COT report, on a large scale which is rare, so it's should be a bullish sign, then we had two more than 1% down day on Wed. and Fri., and Thursday only up 0.5%.
5. Is it possible that this time large spec got it right, not the commercials?
6. Something is going on from the latest COT. Something has to give.
7. Anyway, it's a time to be quick and decisive on my part. Rather be safe than sorry.

Action plan:

1. I think market will likely to test 1490 and then rally back above 1500, but won't touch all time high, before it go down again.
2. So I need to take some puts out when it's approaching 1490 and enter more later.
3. I don't expect market go straight down to 1460, unless we have some very bad news in CDO or economic data.
4. If market closes higher on Monday with light volume, then it's similar to Thursday, we can expect more down days in the week.