OVERBOUGHT???

It is hard to buy into a market that is this overbought. I see a lot of nice patterns, but I want a pullback before I jump in. This doesn't mean that I recommend buying puts on the market right now. A lot of money is lost in trying to pick tops and bottoms. In fact, a lot of traders will give back most of their gains they made during a trend when they try to pick the trend reversal. Like I've been saying for the last few days...wait for the pullback for new positions. We had a spike today on the VIX which was an indication that traders are finally getting a little fearful that the trend is maturing. I will watch this indicator closely tomorrow to see if it continues to move up. The VIX usually moves in an inverse relationship to the market. It will spike up when the market moves down and move down when the market trades up. The VIX is considered a "fear" indicator. When it spikes up, it usually means that traders are rushing to buy puts to protect their long stock positions. Today's move was interesting because the VIX moved up AND the market moved up. When this happens, I look at the move as a possible leading indicator. It could indicate that traders fear we will sell off in the near future so they are buying puts to protect themselves. We didn't get a huge move up in the VIX so we would want to see more confirmation. That confirmation could either be another up day in the VIX (with the market flat or slightly upward), or a sell off that confirms the rise in the VIX. If the S&P 500 drops below a short term moving average (like a 5 day or 10 day moving average), you could look at buying some puts for a short term trade. Be careful though. The easier and safer money will be made from the bullish side until this trend significantly reverses. There aren't too many "big" earnings releases in the next few days. This would be a great time to get a sell off if we are going to get a sell off. Keep an eye on DRYS and EXM. DRYS is reporting earnings this Friday. It spiked up today on high volume even though there was no news. It looks like it has recently completed a bullish ABC pattern and there is a nice potential reward for the risk.