Reflex bounce tomorrow?

Today the stock market get a hit. SPX closed at 1099.23, which is lower than Aug 8th low(1101.54). In the morning, there is a relatively small gap down, comparing to the wide gap in the passed several days. This gave me a positive sign. I was thinking we could start bouncing from today. At 10am, the index bounced to 1139 due to the good news for the ISM data. But it faded away very quickly. Face gave a nice call to short around 113.4 area. Since I was quite optimistic for a bounce, I did not take to short the market. Obviously, I was wrong. The market was tanking by the lead of small cap. TNA was down 15.49% percent today. What a hit! Now nearly all the major indexes are breaking the previous support, which indicates the bearish situation.

The Euro FXE reached a new low at 131.55(-1.44%). The dollar UUP had a clear break out. 10 year yield $TNX was down 7.22% at 17.85. But gold Gld was up 1.84%.

Today my timing model turned to be more negative than the passed three days. Previously I thought it would not turn to be more negative. Clearly after today's action, my prediction for the bull run in October is unlikely to happen. Today's action gives me a big question and push me to think seriously: How to develop an effective trend following system? Look at so many bull run or bear run, if one can catch most of the trend, while giving back a little in the range market, the profit can be huge. I missed the 10 percent gain for SPXU today. Too bad! My timing model gave me signal to short the market on 9/16/2011 close and the signal is still on. Clearly I did not follow it. What a big miss! If I short the COMP by SQQQ on 9/16/2011 for 21.69. It would be 32% percent gain for today (SQQQ closed at 28.77 today). My next goal is to learn to develop trend following system in the coming months.

In the bear market, the broken support can be a bear trap, while short a 2 to 3 days reflex bounce is a better risk-reward strategy. Today there are around 1600 stocks down 4 percent, only 120 stocks up 25 percent quarterly, and around 2500 stocks down 25 percent quarterly. It is more extreme than last Friday. I am expecting for a reflex bounce tomorrow. Or the market gap down tomorrow morning then bounce? I am a little impatient to buy UPRO for a bounce right before close. That is a little bit rush. With the good liquidity for UPRO, I should enter after market to get a much better price, given that the negative momentum will likely be carried from the last five minutes before market close. That is a lesson learned today. I have to keep my position small for this bounce as I am not confident. Hope things work for this kind of extreme.