Both models are in agreement that lower prices are on the near term horizon.
While my original post on Friday had eluded to the possibility that a short term low was put into place Friday, the probability work has altered that prognosis.
The work is calling for a rally day on Monday, but nothing spectacular. As a matter of fact there should be some morning weakness carrying over from Friday, so day traders will want to buy the weakness. Then a rally of about 1/3 the damage done on options expiration should close out Monday. It is quite typical for the Monday after expiration to attempt some type of reversal. If we see the market close near the middle of its high and low range on Monday then the probability work will be right on cue.
It is all downhill from there with a strong drubbing over the next 5-8 days. Of course there will be some rally days mixed in there, but the net result should be sharply lower prices.
I remain hedged against further decline and with these new developments in the work I am going to hold onto the short positions in the Aggressive Equity Trading Account.
One of the keys to this scenario will be the area that the market closes on Monday. Should the market close at or near the middle of its trading range then consider the probability model dead on and brace yourself for some potentially ugly stock prices.
Take the time also to read the commentary on the chart below as it sheds some light on the potential intermediate term direction of stock prices.
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