Market Will Drop Today – Take Profits On Shorts If This Happens

Posted 9:30 AM ET - Last week we saw a heavy round of profit-taking. Technical support levels were breached for the second time in a week. Stocks found their footing Friday and the open today looks stable. We should see a drop to technical support this week. Bull markets die hard. Pullbacks are difficult to trade from the short side because the risk of a bounce is ever present. I am going to lock in some profits today. Support is at the 100-day MA (SPY $241.50). That is within 10 S&P points and it could be challenged today. I want to take profits on my shorts as soon as I see support. Monetary tightening and political uncertainty (debt ceiling) will weigh on the market for the next month. I will try to re-enter shorts on bounces. Swing traders should stay sidelined. The better trade will come when support is established. The farther we fall, the bigger the year-end rally. If you are short, take profits at the 100-day MA and use $243.80 as your stop. Day traders should favor the short side. Resistance is at $243.80. As long as we are below that level I will trade from the short side. If the 100-day MA is tested and it holds I will play the bounce. If the market blows right through that support level today (unlikely) I will trade from the short side and ride my SPY puts/ VXX calls at little longer. Overseas markets where little soft overnight and we saw a small wave of selling into the close Friday. The downside will be tested early today. Take profits if the market bounces quickly. If we take out the first hour low it will challenge the 100-day moving average. I'm always nervous whenever trading against a longer-term trend. I have nice profits and my overnight positions and I want to exit on the next drop. . .

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