That sure was a nice start... Let's hope that it continues, (unless you're a bull of course). Just an update... I sold my short positions for a small profit Friday, and I'm now looking for the next opportunity. Short or Long, I don't care... but short is my favorite.
So, what will next week bring us? That's a tough call. Monday's have had very low volume over the last few months. Each time that happened the market rallied up. Once again... light volume equals an "UP" market. The magic number seems to be around 200 million shares (on the SPY). Guess how many we traded on Friday? About 240 million! And that equals a "Down" day of course.
Above 200 million is almost always a down day and below 200 million is almost always an up day. Since Mondays' have produced some of the lightest trading days of the year, I'm hesitant to tell you that the selling will continue. Yes, the morning could continue the selling... but the midday light volume could erase any gains you make. So, I'd get out early if the selling continues in the morning, and then seems to slow down and go sideways. That's usually about 11am time frame.
If it continues to go lower then we really do have another down day. That would be really bad for the market. If a light day can't get the market back up, then the heavy volume days coming after Monday should produce a hard sell off. This is one of those things were it's best to wait and see what happens on Monday morning.
There are no earnings or economic news of any importance on Monday. Couple that with light volume, and the markets should rally back up. If they don't, and instead have a flat consolation day, then look out... the rest of the week could get ugly!
If I had to choose, I would say that Monday would either be a flat consolation day or an up day. Maybe back to the 1090 area or so. I could be wrong, and the market just sell all day long. If so, then there is support at 1060, and then 1040. But, my gut tells me that we'll go down a little in the morning and rally back all day on light volume. Then close basically flat.
If the market rips higher in the morning then I'll be looking to go short at 1090 area. If it falls in the morning and rallies back throughout the day then I'll wait until the end of the day and look to go short then. If it continues to fall all day, then I'll sit on the sidelines as I would have missed a nice down move. I'm not going to chase it down, only to have it hit 1060 and rally back on me.
This are just what I'm looking for on Monday. Predicting what is going to happen is just guessing at this point. So, yes... it should continue down, but light volume could stop anymore selling temporarily, and even produce a rally back. Basically, I'm glad I'm in cash right now.