Gut Feeling...

 I have a gut feeling and I mentioned this yesterday that we may be building a bigger base then it seems. Look back at this chart of the DIA, we had a reversal down with accumulation of about a day, then shot up for a day, made a slightly lower low in price and continued accumulating. In longer duration trading ranges under accumulation this is what we typically see, accumulation near the lows, a move up, which is too high for WS to accumulate so they send it back lower, often on a head fake move like this one which broke resistance. This opens the door to a flood of retail orders and allows them to accumulate in the wide open as the "other side of the trade", no suspicions are aroused and then we get a move that is much longer and usually higher then the first accumulation period could have provided for. The bigger the base, the bigger the move up.

The SPY is in a bear flag right now, but short and margin interest which are still very high, have dropped from the extreme 2+ year highs of a few weeks ago. When all is said and done, a second period of accumulation should be able to easily move in to the bear flag. From there, my thoughts have been that we would see a new low before any substantial upside, however we'll let the charts tell us what to do.

I'll be looking for confirmation of this and if this is the case, then i would like to take profits on any decent run we get today or at least partial profits, likely enough to guarantee a break even trade on a move lower.

This is still a gut feeling, but one that has been fostering since yesterday. I'll update you as we go along and tell you if the scenario looks likely. For risk reasons I would prefer not to carry as big of a long as I currently have right now any way in to the weekend, especially with a government shut down looming. It may be enough to get Moody's on board the S&P downgrade rating of the US as the politicians are doing exactly what S&P downgraded the US for.