My philosophy of my trading is based on the Elliot Wave Theory. Simply put, the main trend whether down or up is composed of five waves. When the market corrects itself, it does so in three waves.
Right now we are in a "down" or bear market. At this point we are in the third wave. This can be seen by going to www.stockcharts.com/ and clicking on $SPX. This is the chart for the S&P index.
Today we went through support at 1040 decisively. We ended at 1030. So the downtrend continues. The next support level is at about 1000. So, at that point the market may reverse and retrace to about 1050+. I am not concerned about this and will continue to hold short because eventually, the S&P will go below 600.
Patience is really a virtue when trading as long as you are within the trend. Of course, if you are outside of the trend, you must cover your short. So you must be vigilant.
PS. The Dow Theory gave a sell signal on Wednesday. Many traders follow this theory, in short, when the Dow Industrials and the Dow Transports confirm their trends, it gives a signal. (This has worked for a long time.)
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