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The resilience of this market has been, and continues to be, exceptionally impressive. Today’s big move higher could easily be the start of another improbable comeback by the bulls to fresh 52 week highs. However, I am reticent to put my money on that thesis just yet. What am I looking to see? A break and hold above 1332 would force me to get involved on the long side, because it would represent a breach of a the descending resistance trendline, dating back a few weeks (see chart below).
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However, I am also mindful that there are only so many chess pieces that the bulls can sacrifice to bears as a trap, before they end up trapping themselves. The best example that I can give you is last April’s topping pattern, in 2010. Actually, it was May 3, 2010, to be precise, just a few days before the “flash crash.” The S&P 500 wound up closing higher by 14 points. Of course, it ended up being a classic situation of the bulls finally trapping themselves after a long uptrend, followed by a volatile period of choppy price action. Note the prior week’s price action before May 3rd–Look familiar?
My hat is off to anyone who has precisely nailed the past week or two of trading. In situations like this, I have no problem putting ego aside and sitting in cash. If these levels are breached, in either direction (1332 upside, below 1300 on downside), then I will adjust accordingly.
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I’m going to listen, from now on.. No more BS cowboy trading, no thoughts of lost profits… 🙂
a balanced and VERY COGENT piece…
Thanks, Scott.
was thinking about exact same day in May, today also. only time will tell.
1332.03
Thanks Chess. Sound thinking as always and always appreciated by me.
I watched in horror as the Flash Crash unfolded in front of my eyes. All while sitting in 100% cash because of one Chessnwine I followed on twitter. I believe Chess called the pattern in April a megaphone. If you followed him long enough you knew you would be wise to listen to what he had to say. Back to the present it’s been hard one day to sit in 95% cash and other days it was a blessing. I guess that is why it’s called chop. Some might have the expertise to trade just fine in this market. I’ve learned for me Cash is what I call smart. Thank you Chess for teaching and protecting us little guys.