The rally this afternoon has carried much further than I anticipated, and up volume and expanding breadth (see above chart) warn that this MAY be the beginning of a major rally phase. The Nasdaq 100 was showing the clearest elliott wave pattern and it has made a new high this afternoon (see above chart), negating that second 5 wave drop I labeled. The larger trend is still down, but due to the recent strength of the rally making new highs, caution is warranted. I covered some short positions at break even and bought some call options for protection. My bias is still short, but because I'm not sure what the very short term market structure is, I'm moving to a little more conservative. Regardless of what happens the rest of the day, this afternoon's rally calls for a reduction of risk.......for now.
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