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Lets start out with the Ugly.

- Dow down 800 points at the lows of the day.

- New lows vs New highs were extremely lopsided

- VIX, VXN both made new highs.

Now the Bad.

- We didn’t see capitulatory volume.

- Market rallied way off its lows.

- I had to eat 8% loss in the NDX and 7.4% loss in the RUT. Similar losses in the QLD and UWM.

Now the Good.

- We didn’t see capitulation volume. This is good too. The “about to happen” rally will be good, but we will revisit or break the lows we hit today after that rally. Then and only then should we see the capitulatory  volume. I don’t want to see that volume event here, not now – later is better.

- Market rallied way off its lows. This is good. Reverted to the mean, the exhaustion gap theory is working so far. We closed higher than the 10:45 Rydex price.

- We formed tails on the market indexes, and wicks on the volatility indexes. If you look back at previous drops, this will not happen if the market is going to continue to selloff.

- The market is moving according to my expectations.

- The loss in the NDX was 18% midday and the loss in the RUT was around 13% midday. We didn’t close there and recovered a significant amount back.

- People think we needed to close down hard to get a rally. This is good because if the market moves up they will be forced to chase. If you don’t think the market can rally here, then you didn’t think the Dow could rally 500 points in an hour either, but it did. Don’t get tied to the rhetoric.

- Not only has Carter Worth been riding my coat tails by being short all the way into Last Friday, but Carter Worth agrees with me about being long. I guess it depends on how aggressive one’s interpretation is.

- Two of my trading accounts should have funds available tomorrow so that I can buy more longs.

- Lopsided down volume and lopsided new highs/new lows.

Look, do I wish I waited one day and bought today at the close instead? You betcha (wink)! However, thats not what I was supposed to do according to my lights, lines, signals, values, and rules. This trade won’t be considered a loser unless its down on a week over week basis Friday at the close. If tomorrow is up and you’re short, don’t be surprised if a pride of lions bringing Taco Bell comes knocking on your door.

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