We have a tricky period ahead of us right here. For one the market is now entering the timing band for a cycle low. That means it's getting dangerous to press the short side.
However the T1 pattern we've been watching is still a bit short. Ideally I would like to see the market move down to the 650/630 area before looking for a bounce back up to test the consolidation zone and breakdown level of the multi month consolidation.
It's no surprise that the market bounced off the 665 level. That is the 62% retracement of the entire bull market from 1980 to Oct. 07. That is a logical place for shorts to cover and I expect every hedge fund in the world was watching that level.
There wasn't the normal surge in volume as the market reversed on Friday that we usually see at important intermediate lows. Also there was a bit of selling into strength at the close which makes me wonder if Friday really marked the daily cycle bottom.
I think we probably have one more daily cycle down before this is over, so I don't expect the coming low to be anything other than a short term bounce before we see the final move into a more lasting bottom probably in April or early May. (I went over this in depth in the weekend update).
For those wanting to play the long side as we bounce out of the now due daily cycle low I would urge that you at least wait for a swing low and not try to anticipate a bottom at this time.