We had two weeks of violent short covering, raising the worst stocks to impossible heights.

Right now, when I see homebuilders down 7.5% and financials down 2.8%, including those regional banks down 3.3% – I conclude that the shorts finally covered. It probably will take couple of weeks of up and downs, probably testing some resistance on non-bubble stocks and then the bottom will fall off.

I expect a spectacular decline within the next two months

Update:  the optimal strategy for an institutional investor is to not sell into the first bear market downleg, because you may fall into fake bear market, sell, and then be forced to chase the market.

The optimal strategy is to sit tight through the first downleg, then load-up at the bottom and ride the short covering. Then sell at the top. I don’t know how many institutions do like that, but some of them do.

So far this optimal strategy failed only once, in 1929