Friday Conundrum

A bit of a surprise seeing equities heading straight back down as I was expecting a more thorough bounce yesterday. Quite fortuitously I didn’t take partial profits, as I would have under normal conditions, plain reason being that I was getting set up over here and simply didn’t have the time. Right now my shorts are flashing green and it’s turning into a very profitable Friday afternoon. Moral of the story – better to be lucky than good 😉

So let’s take stock of where we are and where we may be heading. This is what I would call a veritable Friday conundrum. The triptych E-Mini panel shows us right at a daily and weekly inflection point where we bounced yesterday. Below ES 2032 we are at risk of descending lower toward the 2k mark and then 1982 at which point we’ll be dancing to Huey Lewis and the News again.

The Zero is showing us real participation today (to the downside) but it’s flattening out a little there toward the end. I think we need to see wait out the close for some possible late session hits. However it’s not unusual to see selling pressure abate a little if the first part of the day has been leading down.

Just to be on the safe side I caught up with some of my breadth indicators. No sign of divergences on the VXV:VIX ratio.

Ditto on the more short term VIX:VOX – this is where I would expect to see the first signs of attempting to trap shorts.

Bottom Line: I am going to do here right now what I would have done yesterday – take partial profits, but leave the door open for continuation lower starting Sunday night. This is how I always would proceed and after banking quite a bit more than 4R (remember I got in at 2103)  it is more than justified and well within my discretionary campaign rules. I won’t pollute the process by attempting to predict where we head next – major inflection points are often touched just before the weekend and for a reason. There is no way knowing whether or not ‘this is it’ (only Huey knows). Let your system rules guide your actions – not your bias, wishful thinking, or various other emotions that stand in the way of banking profits.

On the setup side we do have a two juicy candidates on the futures side:

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I leave you with this – which may become our Monday theme if things play in our favor 😉

Cheers,