We gapped down on Friday but the market slowly trended up all day, showing no signs of weakness.  I pointed out the possible inverse head and shoulders pattern the day before and that’s how I approached the day with my IWM short.  I covered 75% of my position within the first 30 minutes of the open and covered the remaining 25% throughout the day.

Volatility is picking up and I don’t want to be caught up in this whipsaw.  I don’t mind waiting patiently until the next trend begins.  I don’t know where we’re going exactly or when.  I am anticipating another uptrend but I won’t be pulling the trigger early.  Moved to 98% cash to end the week and now focus will be primarily shifted to strong individual stocks for faster trades (hold period likely only a couple days).

Here’s a look at SPY, more notes on chart:

Remember the Elliot Wave Pattern I put up in February, it still applies (waiting patiently for wave 5). The chart below is of DIA, but still applies to all the major indices:

UPDATE 3/4 8:40AM- Transports are not confirming the new highs in DJIA.  Another reason why I am still on the sidelines and not long.

Keep an eye on bonds, TLT. Volatility has been consistently decreasing since June 2012.  RSI has been <70 since September, both signs of weakness (and strength for stocks).  Watch to see if volatility and relative strength begin to pick up, which should be a leading sign for how the equities will end up.

Finally, here’s the IWM short I played on Friday for those that don’t follow yet on StockTwits/Twitter: