TAKING A BREAK

The market took a break today after the huge rally yesterday. The sideways movement today confirmed the strength of yesterday's move. The problem is that there aren't many stocks in good buy positions right now. If you currently have bullish positions, you should probably see if the trend continues. If you are looking to get into new positions, you should probably wait for the next pullback. I just about pulled the trigger on a couple of trades today, but I backed out at the last minute because I didn't like the entry point. I have had some bad luck recently when I have forced trades. If you like to buy the breakout, there are probably several stocks you could get into right now. I will sometimes buy a breakout, but I like to do so when I think the market is nearer to the beginning of the trend. Since I think the market is nearer to the end of the current trend, I would view "buying the breakout" as a riskier strategy. Last week's patterns are still moving well. I would expect there to be a pull back in some of the energy stocks, but the agriculture stocks could make a run. There are some triangle patterns forming on MOS, POT, AGU, CF, IPI, and SQM. See if they break out of the triangle in the next few days. There was also money going into health care today, but I will have to see if that was just temporary. Some of the patterns on those health care stocks look terrible and I would need to see a clear change in trend before I got too excited.

For a bearish perspective, I point to the VIX. With volatility getting back to lower levels, the complacency is increasing. This is usually when the market can sell off in a big way. Although the pattern can go a bit lower still, there is a bullish ABC pattern forming on the VIX. I'm watching this very closely. The market has broken out to new highs, but the VIX has not yet broken to new lows. The bearish view would be that this is a divergence and could be an early sign that the rally won't last. I'm still trading with the current trend...but I am taking defensive measures to protect myself in case there is a sudden sell off.