The stock market closed right off of the SP futures 30-minute M/A on a completed 5-wave from today's highs. I'm currently 20% SDS and 1% DJ futures, having traded 1% SP futures from 1145 to 1137.25.
Thursday at the close is a small I1 bottom. If the DJI can crack critical support I will carry a small position through the very minor I1 uptick lasting through 10/8. The range from bottom to top is less than .2 and I1 tops out at 2.16. While this qualifies as a longer-term I1 hold profile, the inability of DJI to break critical support (currently at 10,640) would indicate an upside pop during the I1 uptick.
First things first, the market has to break 30-minute M/A by a 30-minute close below 1131.25. Until then I can't increase my short exposure.
The following chart has guided me throughout the day. Different moving averages work in different market environments.
What you can take away from this chart are:
1) Head and shoulders with breakdown well underway and a target of 1134
2) Overhead moving averages defining potential stops
3) As the cash market was scaring the short universe, the chart indicates it was just burrowing into overhead resistance.
4) The white line is above the 30-minute breakpoint of 1131.25. I will sell some SDS and cover DJ short at this M/A (currently 1134) because the throw down to the 30-minute break is short. In other words, I can re-enter shorts 3 points lower.
Tonight, I'll be looking for a rally off of the complete 5-wave down to put a SP futures short back on at 1141 (green line above).