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I thought the market was going to fall off a cliff the way it sold off midday. However, it was saved. The NDX and RUT did have a nasty day today, but rallied to close in more normal fashion.

I think the very short term (1-2 days) we will get a bounce.

Typically when the volatility indexes like VXN and VIX get outside two bollinger bands in either direction it sets up a 1 day reversal at a minimum. In extreme cases, using this volatility stretching reversal technique can be trampled in such cases like late 2007. However, when the markets are in a trading range it tends to work well. I don’t use it solely as a decision, but when you add everything you trust altogether and this agrees, I tend to take the trade. Click on the charts for the full picture.

Now any movement higher from here in the indexes should then be shorted as short term trend is typically not done, but it will be close to being done. Therefore the coming sell off after the next bounce (hopefully for me tomorrow), should be bought. Whichever way you like to do it. Ladder in, timing it right, whatever.

However, that short term move to the downside will also probably be limited to 100 pts or less. Positive divergences may develop at that time in the indicators and will be something to watch for at that time.

I tried sniping CPST today that was a mistake. Lost 3%
Sold ABAT today for a 4% loss.
ABP continues to perform for me.
JRCC continues to perform for others.

I remained in cash during the day in the indexes, but went long heavily at the close in the NDX and RUT for a 1-2 day trade if and when profits are there.

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