The long awaited bounce is in

Apologies for not posting more regularly over the past few days, but my day job and other activities have been taking up more of my time. 

In the chart below, we see the bounce that I had alluded to and have been waiting for in posts since last week.  I'm using the SPY to show this, as my E-Signal feed on the SPX looks sort of screwy. 

-click to enlarge-

So, we are now getting pretty close to the descending trend line on both the SPY and S&P 500.  Also, not pictured, we have the 62% Fibonacci retracement  just a few ticks up from where we currently sit.  This is the area that I was hoping we would get to so that I could start legging back into short positions, as I still see us going down much further from here.  I'm not a big Elliot Wave technician, but I follow a few people who are, and several have pointed out that according to their wave counts, we are in the midst of a wave 3-of-3-of-3 down, which in Elliot Wave world is supposed to be pretty catastrophic.  My problem with Elliot Wave theory in general however, is that you can ask 20 traders for their wave count on the same chart pattern, and likely get 20 different interpretations.  Elliot Wave purists will admit this themselves, so I tend to take this type of analysis with a grain of salt, but I don't dismiss it entirely, and especially not when I see several independent sources starting to agree with one another.

Anyway, I'm still sticking with my story that we are in the middle of a larger move to the downside, so I will be positioning myself appropriately.  A word of caution:  This is not a normal market.  In my opinion, it is a highly manipulated market.  I commented on this briefly in my post last weekend about Intel, and I will be writing about this more over the coming weekend, but in a nutshell, the thing everyone needs to keep in mind is that the stock market is the ONLY thing that the current administration can point to as proof that we're in some sort of recovery.  Everything else in our economy has at best, flat-lined, and in most cases gotten worse.  This being the case, it is in the Fed's and the administration's best interest to keep the markets propped up as much as possible....especially going into mid-term elections.  This being the case, be very, very careful getting into short positions now.  Here is how I plan to play the overall market. 

1.  Open a small short position as we go into resistance (110 - 110.50 on the SPY, 1097 - 1100 on the S&P).  Stops set just above the June highs
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2.  Pyramid into a larger position if and as we sell off into the 1080's and 1070's.

3.  Take profits on the initial position at 1040 support, hold the other positions with stops at entry in order to profit from a move through support.

4.  If we do stop out of our initial position, this likely means that the trend has changed and we are headed up.  More analysis will be done if/when that occurs.

As for today....we have some unemployment figures that will post shortly that are likely to be market moving, but on a Friday going into the last holiday weekend of summer, volume will likely be very light, and I wouldn't expect to see any major moves...unless of course the unemployment numbers are horrifically bad, or amazingly good. 

Have a great weekend, and good luck trading.