The risks are high both ways (news/Trump induced short-covering rally off SPY & QQQ support as well as a potential market crash, should something in the financial system (a big fund, bank, etc..) break, due to the swift drop in the stock market.

As such, you should carefully manage your risk with both stops & position sizing that won’t hurt you too bad if things go against your positioning. I posted my thoughts & some charts just before the close today.

It was time to go short but now we need to know what about going in tomorrow. On days like this you could get whacked again.

We’re about 3% away from hitting the bottom of the 2009 bull trend channel. I think we sell off another 3%, touch that bottom channel up trend line and then bounce/dead cat bounce before potentially and eventually breaking that trend line. Or it tags that line and rallys hard.

Good question as most gaps are eventually backfilled but certainly not all. Plus, keep in mind the nature of a bear market, assuming we’re in the early stages of one & not just a run-of-the-mill correction, is that the drops are impulsive, especially once you get to that stage which I refer to as the POR or point-of-recognition. That’s where the masses start to collectively & increasingly realize that “buying the dips”, which have worked so well for so long, just isn’t working anymore and the selling begins to accelerate to the downside, with the counter-trend bounces more brief & shallow, as well as good support levels that would normally bring the buyers in, now getting cut through with little to no reaction as the market drops to them.

Bottom line, how the market acts with SPY & QQQ falling to these pretty decent support levels on the daily chart today should give us additional clarity to the bigger picture & the direction of the next double-digit move (up or down).

At some point do these large gaps need t be backfilled?

My thoughts here: https://rightsideofthechart.com/mid-session-stock-market-trade-ideas-4-3-25/#comment-35105

Personally, I think the downside is most likely limited, at least for today so I probably won’t reverse back to short again (today) but also won’t let the market take back some really nice gains either.