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If you came into this week like I did, you were on watch for the bulls to take advantage of potential bullish setups. In and of itself, that was insufficient reason for me to automatically buy a boatload of stocks and gear up for a Christmas rally. Instead, I was looking to see if the market would actually prove itself first, before adopting any sort of aggression. Clearly, the sell-offs in the earlier part of this week negated that idea, so I was content ride the CRM short I had been already holding for 20 points (I am still short a 1/2 position). Moreover, you can see the benefit of waiting for confirmation, in terms of mitigating risk in not trying to constantly get out in front of the market for a big move. It is very easy to talk the talk, but inside 12631 I must walk the walk as well. Unlike traders/bloggers/authors on other websites, I put it all on the line everyday, and market forces have dictated that there is more demand for me than you. And you know who you are.
As for the current market, you can see what happened on Wednesday and its aftermath below on the stretched out 10-minute chart of the SPY. Note how what amounts to 1225 on the S&P 500 is now resistance, and the market is teetering on breaking down from a bear flag this afternoon. Until price can recapture that level, I see little reason at this point to press any longs here, at least into the weekend. While I may miss out on yet another gap higher on Monday morning, I suspect that in order for the market to sustain an uptrend for longer than half of a day we need to see the constant gaps abate.
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