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Markets on sitting right on major support and have been able to hold on for 2 days now. The following chart shows the 1765-1770 area that has held the market up over the last 48 hrs. If this is breached overnight then a waterfall type move could happen. If we trade above 1774.25 in overnight trading then we could see another move back towards the 1793-1797 zone. I will probably cover my ES short on a move above 1774.25 tonight and look to re-enter around 1790. Also note, the VIX was pushed back today by daily resistance so that is also supportive for the bulls, at least in the short term.
I closed out my 176 SPY Puts that expired in FEB last Fri but just realized I did not post it. I had been underwater almost from the moment I bought them. I was able to sell them for $2.29 so the .52 profit was welcomed since my timing was so bad. It was a small position which is probably part of the reason I forgot to mention it.
I am back to a leveraged short position in the markets. After reviewing the charts and seeing weekly resistance being tested in the SPX I decided to re-enter my positions I exited Friday and Monday.
A daily close above 1793 on the SPX will probably negate the current down move. However, I expect a move to 1650 before this round of selling is over. The next 3 days and 1st week in February will be crucial for the bulls. As shown in the chart below, once 1750 gives we should see a quick swoon to 1650-1700. At that point the backbone of the bull market will be broken. Volatility will be the name of the game in 2014 and should be a great year for traders.
I'm now out of 2/3 of my short position because from 1761-1772 there should be some sort of bounce. Possibly up to 1800+. Depending on what this afternoon looks like I might go ahead and close out the last 1/3.