SHOULD WE JUMP IN AND BUY??

We got a bit of a pullback today. There were several signals yesterday so this wasn't too much of a surprise. Should we have bought puts this morning? You could have but that would have been a risky trade. You won't last too long betting against the trend unless you can get some confirmation that could increase your probabilities. In the big picture, this was not a big selloff. It is hard to tell right now if the selling will continue or if we will rocket to new highs. One thing that I will keep a close eye on this Monday is the VIX or the Volatility Index. You should be able to just type in VIX on your charting service to pull up the chart. This is a measure of fear in the marketplace. It has an inverse relationship to the market which means if it goes down, the market usually goes up (and visa versa). If you are like me, this will mix you up all the time. I always have to stop and think...if this goes up, the market should go down. Anyway, there is a really nice bullish pattern on the intraday chart of the VIX. This means that the VIX could go up...and the market could continue to go down a bit (look for the VIX to move above 42.50). However, this support level might not hold. If the VIX moves down below support (around 40.20), the bull run could really take off. Watch for this confirmation next week. These are short term signals not long term signals. A bullish pattern I like is HANS (I drink enough of their Monster energy drinks to keep them in business...so it must be a safe bet!). If we break higher on the VIX, you could look for a bearish short term move on the DIA or SPY. Have a great weekend!