Monday’s so-far feeble bounce came from a place too obvious to trust. The low was very close to an important bottom at 3226 recorded on January 31. Expect the futures to dip anew on Tuesday, stopping out bulls in order to make another run at recovery. I expect the attempt to fail, and therefore to be shortable before the relapse gets going in earnest. In the meantime, the most promising trade I can discern on the hourly chart would be a buy originating in the ‘nowhere zone’ between the two important lows shown. This is for rABC specialists only, but I will provide guidance if I’m in the Trading Room at a moment of opportunity. One additional note: Although I am not a fan of head-and-shoulder formations, a rally to around 3340 would be ‘interesting’ in an H&S kind of way. _______ UPDATE (Feb 25, 6:59 p.m. EST): In the Trading Room today, I referred to this chart numerous times to warn that the selling begun around mid-morning was likely to turn ugly as the day wore on. In fact, the futures fell an additional 73 points after I posted. A second alert 55 minutes after the initial warning noted that the plunge yet to come could shave an additional 900 points from the Dow. As of the close we were two thirds of the way there but looking for a bounce — potentially tradeable — from the 3098.25 target shown in the chart. Although a tightly stopped bid could work, my recommendation is that you attempt this only if you’ve profited on the way down. ______ UPDATE (Feb 26, 8:00 a.m.): The futures trampolined 53 points (!) after bottoming at 3091.00 at a ridiculous time of day (5:00 a.m.). Despite this inconvenience, numerous subscribers — night owls, it would seem, or perhaps living in eclectic time zones — reported jumping on the trade and crushing it.
