Cognizant, Not Dismissive, of the Monster

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I am cognizant of the recurring theme in a bullish tape: A weak open followed by a trading session that grows stronger as the day progresses. Of course, that type of pattern spawns the monster known as complacency, which eventually spells the end of the trend when buyers lose respect for risk and sellers are nowhere to be found. The key is to ride the “meat” of the trend, cognizant of which direction the winding is blowing, feet firmly planted on the ground to avoid getting swept up by the howling winds of hubris.

Currently, the market has been in the consummate grind-it-up-higher mode, with too many weak opens and strong finishes to count in 2012. The vast array of calls for a correction through price seem to grow with each morning gap down, and yet those soft opens have a knack for being bought up quickly. The net result is somewhat of a stalemate, though the bulls certainly hold the tiebreaker for now. Eventually, the weakness will not be bought. Trying to time that precise moment is much more of a sucker’s game than many traders seem to realize, though, which is all the more reason to side with the prevailing pattern until actually proven otherwise.

Regarding precise support zones, I am looking at 1352 (last week’s lows), followed by 1346 and 1340 as the main points of reference on the S&P 500. If we continue to see more of a correction or consolidation through time, then I expect those levels to hold. As I discussed over the weekend, a 3-5% correction via the major indices would be entirely reasonable within the context of a bull run. That said, we have already seen plenty of digestion and I continue to see stocks acting well and technically set up. Hence, time and energy is probably better spent focusing on the prospect of a further push higher from sound setups, rather than obsessing over a price correction that may or may not come anytime soon.