The DeMark sequential indicator on the four hour time frame continues to impress. It signaled price exhaustion was coming and it came right on time.
The challenge now is figuring out where the market wants to go by observing the fractal patterns which are dictated entirely by the fiscal cliff news. Too early to tell, but a simple ABC upwards is taking shape. Triangulation is a close second, followed by a flat. Any of those patterns would lay claim for more downside after they meet their objectives. Trading above S&P 1430 requires a rethink.
Overall, the bull case remains alive unless the market can take out last week’s flash crash low at 1397ish. Original plan yesterday was to pare off the short positions to a smaller core. However, there was a fiery candle reversal with extreme high tick readings. When the market wants to change directions in a hurry, I did more than cut down on the short side but fully covered it and went long. At this stage, the plan is to capture some upside before getting short again. Position sizing is key and portfolio is currently 30% long and will not get any larger than that overnight since the theme now is to expect the unexpected.
Trade Trekker 