Today's weakness can be counted as a B wave of 2, however breadth is very weak and momentum indicators suggest further losses. But seeing as this wave 2 rally is a counter-trend move, that's expected. I'd like the S&P to get to the 1260 area to start cutting down my short positions (currently at 1265). But I don't want to get too greedy; B waves are the hardest waves to trade, and the upcoming wave C rally to finish this bear market rally will be fierce. I definitely don't want to get caught holding short throughout that rally.
One thing to consider is time. The wave A rally has lasted 6 trading days, so I expect wave B to last 1-2 days, so further weakness is likely.
All-in-all, it's time to start looking for targets to exit short term short positions.
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