By: Scott Redler

When Friday’s news hit, the prudent trader took risk off the table and put themselves in a position to see what happens next, rather than get caught up in the emotion of the moment. The question now is whether this news and Friday’ sell-off will be the catalyst for a bigger correction.

Most indices experienced damage, but did not break. The next level of importance are the 20-day MA–at 1182–and the lower trendline of the uptrend channel. I think 1178-1182 is VERY IMPORTANT. If it holds, I think we move forward with our “Have’s and Have-Not’s” market. We could see the market play with this area, by going through and closing back above. The Daily close will be important.

Most of my stocks and indices hit the sell zones regardless. We had these in place well before the news hit, so most were able to get short and make money on the news if they acted quick.

Use Friday’s low as a pivot as well, for potential short entries, then if they reverse maybe pick up some RedDog Reversal type trades. The bottom line is that this week will be action-packed and volatile, exactly what we want and need in order to make a lot of money. Embrace it and be prepared.

The market will be a push-pull type environment between earnings headlines and Goldman’s news, as well as Washington’s push for regulatory reform.

When the uptrend broke and closed below 1130 in January, we had a 9% correction. Let the market decide where we go from here, all we can do is be prepared.

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