A RALLY IN THE FUTURE?

The sideways movement in the market over the last few weeks has created a near perfect symmetrical triangle pattern on the S&P 500 and the Dow. Today's move down hit the lower rising support line of the triangle. If this support line holds, the market should start to rally and break out of the upper resistance of the triangle. If we rally up, the Dow could reach 12,400 before any significant drop takes place. If we break the support line of the triangle, we will likely start a larger move down. As a natural contrarian, I wonder if the triangle pattern will break out to the upside. So many people are seeing this near perfect bullish triangle pattern. Usually when most of the market is expecting a certain move, the opposite move ends up taking place. The week before Thanksgiving is usually a bearish week with the traditional "Santa Clause" rally usually taking place after Thanksgiving. In my 14 years of trading, I've never seen a significant market drop from Thanksgiving through New Years. Even in the financial collapse of 2008, we had a "Santa Clause" rally. A contrarian would view this as the perfect year for an end of the year stock market drop since so many people are expecting the market to rise. In terms of probabilities, I'd have to say that the odds are greater for another "Santa Clause" rally. If the market starts to rally tomorrow, I'll look to buy calls on the SPY, DIA, and QQQ. COST would still look good as a bullish trade and IBM would be a great bullish trade if it can break out above $190. PCLN might also break out within the next few weeks. If it breaks that support line, you might see me get bearish again very fast.