IS THE NEXT DECLINE ON HOLD?

I will be leaving on vacation tomorrow so this will be my last post this week. The market did break above that .382 retracement today. It also closed above its 10 day MA. These are not the strongest resistance areas, but we can't ignore those bullish clues. One of the mistakes I made after last year's market sell off is that I ignored some of those early bullish clues. I was so convinced that we were moving lower that I ignored those closes above the resistance levels. I mentioned last night that we could move up to the 1225 to 1250 area if we closed above that .382 retracement. That could happen in the short term. The volume has been declining on each of these up days. This is usually a bearish signal and a signal of a correction. However...if we move much higher, the short sellers will start to get squeezed. You can't let a short position move against you very much before you need to step in and cover it. For those familiar with shorting stocks, this means that you would "buy to cover" the position. This additional buying to close those short positions can cause the market to shoot up very quickly. That type of move would likely cause the volume to spike up...and it could lead to a continuation of the rally. I still feel that we are going lower in the intermediate term, but it is really hard to tell where we are going in the short term. Since I am leaving on vacation, I exited some of my bearish trades at the market close today. We not only broke above that resistance area, but we closed at the highs of the day. I was waiting to see if the rally would fade into the close, but it didn't. There is another resistance area to watch...about 1219 on the S&P 500. This was the April 26th high in 2010. If we break above this level, we might start to see that short squeeze. The market has been up for three days in a row. It could pull back a little before going higher. If we sell off big in the next few days, then the counter trend rally would likely be over and the next move down should be underway. That next downside target would be 1040. If we just pull back a bit (a hundred or so Dow points), we would likely move a bit higher. If you want to look at some potential short term bullish trades, AAPL fits our trend analysis criteria. GOOG is close, but still needs some confirmation (a move above its 10 day MA). That's about it from the bullish side. This is why I'm not likely to play any bullish trade. That...and the fact that I'm going on vacation. See you next week.