Why I covered

Here is a 5 minute bar chart of the past two day sessions in the e-minis. I covered my 2 unit short position at 675.00 (blue arrow). I had two main reasons. First, I had succeeded in turning a sow's ear (losing day) into a silk purse (winning day) and I didn't care to let the market undo a good trade. Secondly, the e-minis had just dropped below the previous day's low at 676.25 and giving us a 25 point range for the first 90 minutes of trading. I thought this was likely to be it on the downside for a while, especially because the market has been dropping relentlessly for a month.

I had two other reasons for covering. There was a modest volume climax (red arrows) as the market reached yesterday's low. The very next bar dropped the market a little lower on slightly reduced volume. The sort of action near obvious support or resistance often indicates the temporary end of a swing. Another factor in my decision was the observation that the first period of big activity and swings during any trading day typically ends between 90 minutes and 2 hours after the day session open. I covered at the 90 minute point.

I still think that we shall see the 665 level today, but I think the market will rally first. The purple dotted line is midpoint resistance and I expect to be a seller near there later today.