Another day, another chance to make ungodly sums of money based on my setups from the night before, and the from the ones I posted going into this week. And yet here I am again, going all high school vice principal on your ass, preaching discipline and a calm demeanor. Today, we saw a 1.12% rise in the $SPX on pretty strong volume to close at 1210. We are finally starting to see cautious bulls turn into more exuberant bulls. Main Street media is becoming more and more bullish on the economy and the stock market. Retail money on the sidelines wants back in to stocks. While we still may have quite a ways to run to the upside, I hereby declare that today is the beginning of the end of this rally on a short to intermediate term basis.
Again, please recall that the summer of 2008 rally topped out in a broad 1220-1300 range. That area was the last place where the most amount of bulls got trapped before we saw the greatest crash of our lifetime. I fully expect that when those bulls, indeed many of whom are fund managers, are finally made whole they will take a decent amount off of the table. The updated daily chart shown below should clarify my thoughts.
The bottom line is that you always have to consider reward and profit within the context of the risk involved. In my estimation, despite the profitable individual setups that I have been offering up to you, the closer we get to 1220 and above, the higher the risk there is of an imminent correction. I still have some longs on, but reduced my exposure today and was a net seller. I sold out of $KLIC on the huge move up, and initiated a small position in $FTK (yes, The Fly’s Flotek) because the chart looks good and the short position looks to get squeezed.
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How big of a correction do you see when it happens?
Whenever the market weakens and rolls over, my eyes will be on that 1150 level. Recall how significant that price was in January. We saw a sharp, furious pullback for a few weeks after failing there. To go back down and successfully retest it will bring in a lot more money willing to make even bolder bets. If we fail there, then we’ve got problems. Note also that at the current pace, the 50 and 100 day are likely to head up to around 1150 in the next few weeks anyway. So, I think that level will kind of naturally be the battleground in a correction.
Thanks. You have been spot on so far so I dont dount you now. Saving my cash waiting.
Thanks, much appreciated. Patience is key for you. The topping process could be anywhere from 1220-1300 if we get a blow off.