It's Like a Mild Day in the Dead of Winter

When rallies occur in the context of established downtrends, as defined by declining 200-day moving averages above price on the major stock indices, it is always interesting to see the various emotions which are associated with the green. Trapped longs, from higher prices, can breath a temporary sigh or relief (hence the phrase "relief rally"), but usually they are best served by selling into the strength. 

Oftentimes, however, they do not sell into the rally, which often sets up a new leg down in the bear market, usually persisting until longs have thoroughly capitulated and thrown in the towel on any long inventory. 

The last few years have skewed that typical scenario, however, given the one-way uptrends and plethora of V-shaped rallies we saw to new all-time highs on the indices. In essence, the "winters" of the market since 2011 have been very brief. One mild day in the midst of winter usually does not mean the end of winter, but it has at various times over the last few years. Still, more often than not over the long run, a mild day in the dead of winter simply serves as a respite before the next storm comes through. 

Eventually, the tide always turns in markets. And, again, the declining 200-day moving averages serve as concrete evidence of this change in character. 

Nonetheless, a relief rally can still last quite a while in a bear market. Even in 2008, for example, an epic and rare bear, there were weeks on end where bulls dominated the action, even if it did simply set up the next ferocious leg lower. 

With this in mind, a name like JCP is on my radar as a very quick long idea. The stock is hated, longs have been demoralized, and it is heavily-shorted and ripe to squeeze. Retail stocks are acting fairly well overall today, and quite a few obvious losers like GPRO may finally be ripe to rally, now that the daily bottom-callers have been silenced.