Click on Chart to EnlargeThe chart above is SPY at about 3:00 ET. I have included some notes on the chart with what I think is most likely happening from a market logic and pattern interpretation.
After the low 3 weeks ago, there was an advance which included several small corrections of roughly equal size. Then there was a decline about twice as big last Thursday and Friday. I had expected there to be a larger correction after that, but the market has made new highs and is yet to form a really solid reversal pattern.
So my interpretation is that a wave did complete before that larger correction and now we are in another wave up which should end early to mid next week if this idea is correct. After that I do think there will be a much larger pullback than any since the March 6th low.
There are two relatively short-term models from Sentimentrader.com that I use to time entries and exits for blog trades. The most sensitive one did hit oversold later in the same day that the entry occurred for the current trade on SDS. The slightly different and longer short-term model has yet to even near oversold, but is building a bearish divergence with each new high in price. This slightly longer model is the one that I will use to post the trade exit because it is making more "sense" with price action. Recent trades have had very little drawdown intratrade, but I expect this one will not be the same way. It is easy to get spoiled after several bang, bang type trades in a row.
To sum up, I am pretty confident on several different grounds that we are close to the start of a very significant pullback, but it looks like it will be a week or so before an exit signal will come for this trade on SDS.
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