Last Friday's action has done a lot of damage in a lot of sectors like the Semiconductors and the Transports, in my opinion both were leading the market down. Last week I pointed out the importance of keeping track of the VIX and VXN as a clue of a market reversal. Both were on their 5th Wave and Friday could have been the beginning of the new leg up. Last time we had 5 waves down in the VIX we had a powerful move down in the market.
As I still believe that we are in a Bear market, I would play this market with a lot of caution on the upside, instead of using this pullback as an opportunity to go long for long term swing trades I would go long just trading the 15 and 60 min charts. I think we are making a correction of this bear market rally and I would be focusing on the short side.
If you want to go long in this pullback just look at the 60 min chart, pay attention at the VXN chart, and look SPX weekly as another scenario.
As you can see we never took the 200 day MA on the daily chart...... and is going to be difficult to take it.
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