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THE PRICE IS ALWAYS RIGHT
Sorry for not posting late last week. My wife had her 40th birthday and it turned into a three day celebration. We did get a 40 point move on the S&P 500...but it was up not down. I will admit that I probably jumped the gun on that call. I would have normally waited until we had broken below the 982 area (support), but I felt confident that another move down was underway. If anything, this underscores the importance of using stops. Every trader will have moments where he feels he is absolutely right. The stops are a "check" against that confidence. I had told you earlier that I could make an argument for an upward move, a downward move, and a sideways move over the next few weeks. That is usually a sign that the market could go anywhere. That is also a 
sign that the safest place to be is in cash. I will still reiterate that point. I was stopped out of my trades last week and I am now in a cash position. I will probably keep this position for a little while. I might get into short term trades here and there, but I will keep the bulk in cash. The further we drift higher...especially with not much of a fundamental reason for doing so...the more likely we will get a sharp and sudden drop when the next correction comes. This is what I was expecting last week. There is still a lot of sideline money coming into the market which is why it keeps going up. When that money is gone, we will come crashing down a bit. When I look at the potential reward for one more move up, it doesn't outweigh the risk of a big move down. This is why I am content to sit for now. I will still try to recommend things, but you should use a limited amount of capital for any trades right now. Let me show you the point where I knew I was wrong last week. We had bumped up against the 50% retracement (around 990 on the S&P 500) for a couple of hours on Tuesday. Wednesday morning the futures were down over 10 points on the S&P 500. It looked like it was going to be a 
big move down. After the gap down in the morning, the markets came roaring back. I was in class when the S&P 500 made a big move above that 50% retracement area. This is when I knew that the probabilities had shifted to the bullish side. Another key part of the analysis was that we had reversed Monday's big move down in three days. When the market (or stock) makes a big move (up or down), we expect to retrace part of that move before continuing it. If it reverses the big move in just a few days, it means that the big move was not significant and that the previous trend is more likely to continue. Since we made up the Monday drop in three days, it became more likely that the uptrend would continue. There is some possible resistance here (around 1035) from a 2001 support area.
sign that the safest place to be is in cash. I will still reiterate that point. I was stopped out of my trades last week and I am now in a cash position. I will probably keep this position for a little while. I might get into short term trades here and there, but I will keep the bulk in cash. The further we drift higher...especially with not much of a fundamental reason for doing so...the more likely we will get a sharp and sudden drop when the next correction comes. This is what I was expecting last week. There is still a lot of sideline money coming into the market which is why it keeps going up. When that money is gone, we will come crashing down a bit. When I look at the potential reward for one more move up, it doesn't outweigh the risk of a big move down. This is why I am content to sit for now. I will still try to recommend things, but you should use a limited amount of capital for any trades right now. Let me show you the point where I knew I was wrong last week. We had bumped up against the 50% retracement (around 990 on the S&P 500) for a couple of hours on Tuesday. Wednesday morning the futures were down over 10 points on the S&P 500. It looked like it was going to be a 
big move down. After the gap down in the morning, the markets came roaring back. I was in class when the S&P 500 made a big move above that 50% retracement area. This is when I knew that the probabilities had shifted to the bullish side. Another key part of the analysis was that we had reversed Monday's big move down in three days. When the market (or stock) makes a big move (up or down), we expect to retrace part of that move before continuing it. If it reverses the big move in just a few days, it means that the big move was not significant and that the previous trend is more likely to continue. Since we made up the Monday drop in three days, it became more likely that the uptrend would continue. There is some possible resistance here (around 1035) from a 2001 support area.
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