The stock indices are “digesting’ the ramp up that began the last trading day of the year, forming Balance Areas which are increasingly mature. This is a market condition conducive to finding the reward to risk trade we like to find; trades with a multiple potential reward of the risk that must be assumed to take the trade.

It is almost certain the indices are on the verge of yet another sharp move. I am favoring the short side at this time because of a number of divergences that continue to mount. However, I am well aware I may be wrong and the sharp move that is coming will be up instead of down. I’m not going to chase this market at this time, so I’m happy to be wrong and on the sidelines if my short bias is wrong.

I would like to see the ES reach 1462-1464, the present upper Key Reference Area accompanied by additional divergences for the opportunity to take short positions My target for that trade is below 1450, and possibly below 1440.

If the ES begins to break down before reaching 1462-1464 I will be a seller in the lower KRA near 1451-1450, targeting 1440 or lower.