Get Short Mkt Here @ DOW 12650...

After a nice rally off the March 10th lows, the risk/reward profile of the equity market is now favoring a short position.  Many stocks have had very nice runs here fueled by short covering, and we believe equity prices have gotten a bit ahead of themselves, with the so-called early-cycle recovery names now trading in near-term overbought territories.  Financials continue to be lackluster, with value investors still finding a dearth of reasons to get heavily long.  On a technical basis we also have major resistance here at ~12700, with a double top being produced in early and late February (see chart below).  If the DOW can not close above 12,800 we expect this near term rally to retrace at least 50% to ~12,200.  Of course if further negative news surfaces within the financials (whether it is here or overseas) it is possible we might retest the lows, however I believe it is much more likely that our next low will be higher than our previous lows at around 11,900-12,000.