Dodger, I did exactly what you suggested. I held a short from Friday, a gain then which turned into a loss. I closed that short pretty much after I had sensed the market was strong, with a small loss. I will review the yesterday's update again, thanks for the hint.

Steve, Could you give an example of yours in tonight's update, please? Matt gave a few hints but I would like your systematic review :-)

It's a close call. We are almost at the resistance 825, currently at 823. If you have substantial profits, you might take them. We could move a bit higher tomorrow, and only then perhaps reverse.

FAZ is down 42%. It's unbelievable!

Matt, did you gapless system tell you to sell or buy the gap this morning? My conclusion was to sell (based on your explained logic of that system), and it looks I was wrong. I stayed short for a bit and then covered that short quickly.

Yes, 78% up, 18% down. http://finance.yahoo.com/marketupdate/overview?u

I am waiting till the end of the day before going short.

Dodger, you are referring to 60-minute charts as long-term charts here? Please clarify. I did the same mistake on that exact day.

Thanks a lot for the chart, rp!

The swing trade on FAZ was at 29.50, and the stop should be at 10.%*3/2=15.08% lower. My stop is at 26.

In my understanding, this gap should be bought: it is going against the direction in which the moving averages point to. FWIW.

rp, Your SPY chart explained the intraday bounce pretty well. As you observed that XLF retraced 38% of its decline, it may bounce to the MA(50) or the upper trendline before going lower. Is there any trendline support for it at the Friday close?

Matt, what's your target for the wave A down? I have 750 in mind, as you said last night. Or that's for wave C? You also said that 735 would be a good place to start thinking of going long again. I am fully short at the moment, and would like to take profits when we approach the end of wave A. Wave 2 should last for about 2 weeks, so it's too early yet to think of the end of wave A, IMO. Thanks!

Based on where the market is now and assuming that FAZ moves inversely with the market, there is a lot more upside to FAZ. I would still take that trade, although it's riskier now than it was yesterday. I entered FAZ with the average pace of 29.56 on a cross of EMAs yesterday in the afternoon.

One more observation. On the XLFchart the descending upper trend line, that contained the channel in which XLF used to be placed and broke out of, comes at around 7.50sh (or MA(20)). That would be a likely place of strong resistance and a possible reversal.

While Matt is preparing his XLF chart with Fibonacci retracements, take a look at $bkx. It's MA(20)=24.00, it could be one of the targets. I would be looking for some trend line support, if Matt can draw it. For what it's worth.

Ravun, It looks to me like we are seeing a distribution pattern here after the rally since 666 retraced 38% of the decline from January highs. What's to follow is a few days of choppy action and  a  slow decline to 38% of the latest move up. As an example of this action, I have the price action of any gold stock in the fall of last year. The key similarities are the V-shaped action during a rise and slow but steady decline. Is this your projected course of action? I am trying to make sense of this in real terms of buying and then taking profits. Thanks!

Examine the pattern of gold stocks last Fall for a likely pattern: a very steep incline, then a very steep drop and a higher low; and slower rise from there.

I would hold. The upside is limited to about 27 points on the $SPX, IMO.

Wait for negative divergence on MACD on 60-minute charts. I can see none so far on $SPX. I can see some on SRS and SKF.

Then it would be a very strong resistance. For crude oil, 150 was a big number. For $SPX 800 might be such a number. So this advance will top at 797 :-)