Well we ran up to the 1352.70 level right off this morning; then quickly retraced back to the 1346 and got some traction. From there we spent the rest of the day grinding back to the 1352 level only to pull off that; finding a small test bounce right before the close at 1350.
It's a difficult time to look at any long positions at this time. Obviously the risk/reward on quality stocks is not very attractive; at least from a technical perspective. It's very likely we will continue to grind up into last year highs in the S&P - reflecting the stocks it represents and more. With that said, i personally don't see a catylist strong enough to propel us beyond those levels at this time. Unless we were to see some phenominal economic results to come out this week and beyond, or that combined with some miracle in Europe, it will be hard for investors to want to risk putting on large long positions. I see many of the same scenarios playing out now that iv'e seen before in the market. Cycles, the quality stocks get overbought, then the marginal companies start moving, then its the small caps that run, and the media starts interviewing investors who claim the market is going sky high. You see bottom fishing going on in names that ordinarily wouldn't get a bid start taking off. For crying out loud, then the shipping stocks start flying sky high. Iv'e seen these patterns play out before. I'm glad to see it because it gives me confidence in noticing patterns in market behavior. I'm not saying we will sell hard at a specified time. But i do know to be more nimble as we go forward; and manage my risk closer as well as lay off the trigger as we chew away at 52 week high levels in the market.
If we make a clean break above 1354 and close above that, i could see going higher yet; possibly hitting the 1370 level in short order. That would put us at the top of last year's level in the market. To speculate beyond that would require some more upside in the meanwhile. I could throw up a bunch of charts tonight, but will keep it brief and refocus on the short term price action with the 10 min chart. This shows how we are working through the recent levels pretty well. You can see by today't action we recovered from friday's drop and ran back up in the form one could describe as an ascending wedge; which is a healthy approach to recent resistance. I'll be watching to see if we can hold the 1350 level where we made a swing low prior to close and if we can handle some action in the 1352.70 and 1354 range.
click chart to view