SECOND STRONG RALLY

The market rallied strong for a second straight day...closing very near the highs of the day. The volume on the SPY was still on the lighter side, but it was a bit higher than yesterday's volume. The DOW and Nasdaq had lighter volume. I usually don't like to see a "straight up" rally when I am expecting another move down. If we get another strong move tomorrow, I will move my outlook to "neutral" in case the buyers are ready to try to push the market higher. If we don't get the drop I'm expecting, I will take a bit of a loss on the recent position I set up...however, the percentage loss won't be much different than if I had used a stop (Remember that I didn't use stops for the most recent option trades I entered. I just cut the position size in half and kept the risk percentage the same). The benefit of this approach is that it allows me to have a chance at breakeven (or even a gain) if I get the expected drop a bit later. Even with the strong rally these last two days, there are still reasons to doubt the rally. The technology sector has led the way for most of the last year, but this group has remained very weak over the last two days. Even if the tech stocks decide to participate tomorrow, I think it would be too little too late. Don't chase this rally from the long side (bullish side). It's too risky. This rally still has signs of a "suckers rally". If the market can give back today's gains tomorrow, look to get into some put options. If we rally another 100 points in the DOW or if we barely move up or down, be patient and wait another day for some sort of confirmation.