There’s just one condition I really need to see before I’ll pile into short trades…

The market is doing its best to frustrate as many participants as possible.…

If you had fallen asleep last Tuesday evening, and then just woke up this morning, you wouldn’t notice anything different about the stock market. You wouldn’t know the S&P 500 suffered a 43-point drop last Wednesday. You wouldn’t know about the three-day-rally since then that has nearly recovered the entire decline.

As I went through my chart review this past weekend, the first thing I thought of was, “Is it possible last Wednesday’s 1.8% drop in the S&P 500 was just a one-day correction – designed to shake out weak bulls, and get overly aggressive bears to make big downside bets just before the market blasts higher one more time?” After all, most of the technical momentum indicators never reached extremely overbought conditions. We never got a breakdown in traditional leading sectors like high-yield bonds and semiconductor stocks. And technical conditions quickly reached oversold conditions on Wednesday’s decline – which is why I advised my Delta Report subscribers NOT to add short positions into the decline.

Happy option expiration day. Longtime readers know I’m not a fan of establishing new trades on a Friday, right in front of a weekend. I’m even less a fan of trading on option expiration day. The potential for “funny business” is too great. So, instead of writing about the technical condition of the stock market today, let’s open up the mailbag and see what sort of comments were inspired by this week’s volatility. But first… a little background…

The S&P 500 has reached my downside target for the recent decline. It could fall farther, of course. But conditions are now oversold enough that the downside risk is limited from here. And the potential reward now justifies that risk.