SNAP BACK RALLY

Today's rally was exactly what I was talking about in the last few postings. It is common to get sharp counter trend rallies within downtrends. It is possible that we could rally up a bit more, but we are likely setting up for another move down. This doesn't mean that a downward move is guaranteed. In trading we deal in probabilities, not absolutes. Since we broke through those support levels last week, it increased the probability of a down trending move. When the trend turns down, the rallies become opportunities to buy puts. Buying puts on the rallies often give the trades higher reward to risk capabilities. If the market starts to break back above the 1218-1220 resistance area, we might need to re-evaluate the outlook. Until then, I'm recommending puts on the SPY, DIA, and QQQ...or calls on the FAZ or TZA. If you get into any of these trades, be aware that we could go up a bit further before dropping. You might need to be patient...as well as use good money and trade management. Many of the Elliott Wave counts are pointing to some further selling once this rally is complete. We'll see if those counts are correct.