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Red Alert Continued

Red Alert Continued
 

The strength we saw in the major equity indices today is more consistent with the market forming a top as we approach time targets of  4/22 and 4/23. Based on the notion that the market low that formed two days ago on 4/18 represents the start of a new thrust upward, the expectation is that its run time would be for this week, and then abruptly reverse to the downside on Monday (04/25).  Considering the magnitude of today’s move however, along  with the shorter week than typical (due to the holiday, the market is closed Friday), I need to consider the possibility that the projected reversal time window (4/22 thru 4/25) actually arrived early, ie this past Monday.

The strategy I’m using, is to cautiously look to go short the market. One approach is to incrementally raise sell stops as the market continues to rise. One could also buy straddles and then adjust the position once the market has more clearly shown it’s directional hand. If the market has not reversed to the downside by Tues. 4/26, or if it takes out the high of February 18 of the major stock indices, that would more clearly indicate the reversal already occurred and I would look to go long accordingly. Bottom line, I will establish a position during tomorrow’s session.

 

 

Disclaimer: The above is intended for educational purposes and is not intended as specific trading as a specific trading recommendation.

 

 

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