This does not change what I trade off of as my priority index, but it has been a while since I made any reference to the Dow and I know a bunch of people follow only this index.
The probability model hit it on the head again today with the strong move to the downside.
The preliminary numbers on this model are calling for much of the same for Friday... Strong downside action that takes no prisoners. As a matter of fact there are 2 components in the model that are signaling a much worse day tomorrow then we saw today.
Now, these are the preliminary numbers on the model. I cannot calculate the entire model until after 7pm when most of the after market trading has completed. I thought I would post a heads up though with these preliminary numbers that most definitely call for a continuation of the decline.
The chart of the Dow gives some reference points to watch for potential stabilization or reversal.
13160 on the Dow has quite a bit of confluence from several time frames so we really want to watch that area.
Keep in mind also that I still don't know if this is just a correction of the rally off the August 16 low or if this is in fact a second leg down of a deeper correction. This will become clearer as the decline continues and sentiment is monitored.
Can you believe the Dow was down 362 points today and the CBOE Put/Call ratio was .97!!
The market is getting hammered and still there is more call buying than put buying. It is precisely this type of mind set in the market that causes me to think that the August lows will be broken. Time will tell.
For now, I continue to sell all rallies and the long term portfolio remains 100% hedged.
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