BIG REVERSAL

There was a large swing near the close of the market today. This type of price action usually has some follow through which is why I would expect the market to rally up a bit tomorrow...and perhaps over the next few days. There was a similar reversal pattern on September 6th, but the rally only lasted 1 day. Today was a stronger reversal pattern because the market was able to close higher than where it opened this morning. There are two areas to look at. One would be the 1200 area. The other would be around 1250 (top of the corrective range...see last Thursday's chart). I don't think we will rally that high, but we have to consider it a possibility. You could try to play the expected rally, but the safest entry for that trade would have been at the close today. The safest play here is to wait for the rally, then set up the next round of bearish trades...just like we did last time. I still like the GLD put option trade. This trade should go lower with any stock market rally. The dollar is also gaining strength which will continue to put pressure on gold to go lower. The TZA trade (call option) may be on hold for a few days, but I still like the trade...much like the FAZ trade last week. The reward to risk will be fantastic if the market pulls back a bit.