BULL STILL LOOKING STRONG

The bulls always look the strongest right when they are about to be trampled. This is why we will enter this week with cautious optimism. The market is overbought and it should pull back...but that doesn't mean it will. I've seen many of these moves before. If you do want to try to pick a possible selloff from an overbought condition, look for a key signal that doesn't come from your "gut". Look for some early clues like a drop below its 10 day moving average or a spike up in the VIX. For example, you could go long on AAPL until it breaks below its 10 day moving average or if it fills in its most recent gap. Then you could choose to go short, or wait for a correction to complete, or trade any clear new trend that develops. I think we will be closer to a pullback when we see the VIX start to spike up. As long as the VIX keeps going lower, the uptrend will continue because the market is confident it will continue. This might be a bit late, but look at the XBI this week. This is the biotech ETF. There are a lot of biotech and health care related stocks reporting in the next few days. Now that Health Care reform has been delayed in congress, we could start to see a sharp rise in some of these companies. Also watch Energy this week. There are a lot of energy related companies that are reporting in the next two weeks. Now keep in mind that 80% to 90% of stocks follow the major market averages. If there are some great reports by some of these companies and the overall market is down, the market could drag the good companies down with it. For those that were timid to get into the market, you missed the "easy money" of the last two weeks. Just check the stocks I recommended. There should be more fun in the next two weeks, but the trades might take a bit more work. Have a good Monday.