Back to the Short Side

Yup. The model is still long but probably Friday will turn out to be the last day of the uptrend in the stochastic. The stochastic can still rise as long as the index remains above 1582 (assuming a high higher than Thursday's 1629 or a low below 1558 do not occur). Friday is also options expiration day. After a strong rally one might expect a sell off on options expiration day as the "max-pain effect" comes into play. Many buyers of call options will have in the money positions. If they sell them to take the profits rather than exercising them the option sellers will then sell the stock they used to hedge their short options positions (delta hedging). This puts a downward pressure on stock prices. Well, just a theory. Futures also expire this time so a lot of stuff is happening - what is called a "quadruple witching". The Elliott Wave formation that began at Monday's low looks complete too. Also my weekly model's forecast for next week would make more sense if prices back off a bit on Friday. So that's my reasoning.