Watch for Short Covering Rally

Sorry for not updating this post recently. Outstanding breakouts were few and far between during the previous rally, leading me to be in a hurry up and wait mode, which broke violently to a look for a place to sell quickly mode.

This is just a brief post to say I'm not long in individual stocks at the moment and neither should you be. I do like gold to the upside, but watch for a pullback over the next couple of days. It's trading lower tonight already.

More importantly, and the biggest reason for this post, is to watch for a strong short covering rally. As I write this, futures are up well over 3%. The S&P500 shows close to opening around the 1150 level. Don't get excited that the market is coming back and that it's time to search for breakouts.

That violent break last week is more likely a sign of much more selling to come. Be patient and wait if you only have skill in buying long-term break outs. If you are more adventurous, there is money in day trading, but this is difficult business.

What is likely to happen is the market will rally up to key levels and trend lines, then roll back over and selling will resume. I am waiting for a rally, and it currently looks like this will happen in earnest Monday, then start shorting the market close the 8 day moving average. This approximates to an area between 1155 and 1165 on the S&P500. This is not advice, this is just me telling you what I'm looking at doing. Shorting isn't easy.

But as always, let the charts tell you what is going on. Make sure you have stops in place at appropriate levels to protect your capital in case you are wrong in your trade. This is a crazy market right now, be cautious.