Todays market action was quite the contrary to what I had anticipated and once again the stop loss on my short positions and put options save me from a much larger loss on the day.
All of this volatility this week is no doubt relating to option expiration with the sharp reversal near the end of the day Wednesday and the breakout higher today.
I must admit, it is a fairly bullish sign with the S&P 500 futures closing above 1421.50 which was the breakout point. The question now is can we get any follow through from this breakout. The bullish indications with the close above 1421.50 will be quickly reversed should we close back below 1421.50 in the next couple of days.
The day to day sequencing pattern for short term traders calls for a flat to lower open followed by early weakness in the first hour. This may be followed by a general firming of prices from 10:30AM to 1:00PM. After 1pm however I will be looking to be a very aggressive seller of this market, especially if we start to see some technical breakdowns at that time. So for Friday, aggressive traders would best be served to wait for the last half of the day and see if in fact a large decline is in the making.
On the intermediate term front I continue to allocate a bearish 45% to equities and I continue to expect a decline of sorts in the very near future.