Why I got out

I just sold my two long units at 850.75 after buying them at an average of 842.25 earlier today. Why did I get out?

My range estimate for today was 835-860. The market so far has traded as high at 856.75 - not far from my estimate for the top of today's range. When I saw that high print I believed that today's demand shock would prevent any reaction of more than 6 points and I figured that the high of the day would more likely be 865 or so instead of 860. So the depth of the subsequent reaction which carried the e-minis down to 845.50 surprised me. When the market surprises me I start to wonder whether my current assessment needs modification.

In this case I was also bothered by the fact that the drop from 856.75 (and not far from the top of the range estimate) was an uncorrected one. Such uncorrected counter trend moves are often only the first shoe to drop, the second shoe being a second decline to a slightly lower low. In this case I also saw support at the midpoint of the correction from yesterday's high at 848.75 to this morning's low at 836 (purple dotted line) as well as at the point that would make the drop from 856.75 as big as the drop that ended at 836 (purple rectangle). Both support levels were below the 845.50 low of the reaction. It thus seemed reasonable to expect a second down leg to develop before the market took out the 856.75 high.

Give these considerations I decided that it was appropriate to accept a "half a loaf" of profit and sell my position at a lower high after a six point rally. I plan to put my long position back on near 844 or when the market gives me a good reason to think the rally is about to resume.