With the futures down nearly 300 on the Dow this morning, two possibilities come to mind. One, this morning's open is a gift to those who failed or were unable to take profits on shorts yesterday before the rally. Two, yesterday's rally was a fake. Perhaps the best course of action is to begin taking some profits on shorts, but taking a wait and see on the confirmed rally. If the Dow falls below 8437, a decline of 542 points, the rally will be dead in the water since it will only be 3 waves. On the other hand, if it fails to fall more than 274 points below 8705, then this mornings gap down open could be wave 4 of a 5 wave advance off of the lows. For the Qs, the levels are 30.32 and 31.43, respectively. If the rally advances above yesterday's highs, it will probably gain traction.
Typical, but not required, market action on Fridays after a major advance on Thursday is for the initial selloff to bottom around 10:30am to 11:00am. The tenor of that decline will tell the tale.
Overall, it appears that markets are working on a triangle. If so, the triangle targets are 6934 for the Dow and 25.80 for the Qs. Another possibility is an expanded flat correction. In that case, we will see new lows followed by a massive rally to back above the 10/14 highs and then a retest of the lows. The last possibitity with merit is that today's decline is wave 3 of a 5 wave decline to the lows. In that case, we could see much lower lows, 6445 on the Dow and 20.52 for the Qs.
Unless you are trading intraday with a proven strategy, I think that taking profits on declines when they occur is the best approach. Looking back to 10/10, the 7884 low lasted all of a few seconds - not much time to get out. I suspect that will be the case this time as well. We may make one or more new lows, but they will be so short in duration that you will not be able to react quickly enough to take advantage. Greed will not be rewarded.