The probability model really hit today on the head and although I struggled early in the Day Trading trying to fade the open, I was able to capture 8 1/2 points on the S&P 500 thanks to the last hour of trading. Before the last hour I was behind the eight ball by 4 1/2 points which alone is hard to believe considering the magnitude of the decline, but sometimes it goes your way and other times it just doesn't seem like you can do anything right. This is how the first half of the day went, but I was rescued by the position I put on in the last hour.
Well enough of the details of the trading day, lets get on with the meat!
The probability study calls for a continuation of the sharply lower prices, but there is actually a bright side to this outcome. The model also calls for a sharp recovery from the lower prices, which if it pans out should offer some great trade opportunities.
The intermediate term seems to be playing out pretty much in line with our expectations. The time frame is a bit off, but price is reacting almost to a script.
Price targets for this leg down are still quite a ways away from current prices. First target comes in at 1458 on the S&P 500 cash and there is also a target all the way down at 1420.
The breaking of 1490 on the cash index seems to have been the straw that broke the camels back and it seems there is more to come.
Keep your core positions hedged and lets await some type of intermediate term low to make a call as to whether or not the decline is over. I will tell you one thing..... The Put Call ratio continues to dictate that much lower prices are in the offing. The market was down more than 360 points today and the Put/Call ratio stood at 1.06!!!! It should have been at 2.10 or higher to even hint that a low was in the making.
We will continue to take things one day at a time and see what the market offers us.