Thursday, March 11, 2010
S&P Extends Higher, When Will it End?
Well the market has grinded higher, despite what I've seen as a weakening topping structure. This is a good exhibit about how difficult it can be to pick tops or bottoms without any confirmation. But, on the flip side of that, if you wait too long then you miss the big move. So it's a bit of a art to get that middle-ground. I've obviously been wrong the past few days in saying the market should fall soon as the S&P has rallied higher and higher during that time. But that doesn't change my stance. I have to take an objective approach and apply my methods to the market and call it as I see it. And I still see this market as extended to the upside and would rather wait to get positioned to the short side when I get confirmation, or a strong hint, that a top is in. Despite the rally looking impressive, and strong, I cannot justify getting long at this point with the analysis methods I use. So I'll wait to try and get short when I see a good opportunity.
Just to give you an idea of things I'm looking at and why I never bought into this rally is the SPY (S&P ETF) chart attached above. In looking at this market I think it's amazing that the big decline we saw into February was on increasing volume, while the rebound was done on decreasing volume. Yet the market continued to float higher and higher to test the prior highs. In the short term, the bulls can be happy and continue to play the market's short term movements, no matter what the logic is. But for the medium and long term bulls, this data here cannot be encouraging to them. The market has yet to show signs of an actual top, and may just continue to float higher for days. But the methods and analysis I use to not support getting long here, but instead wait for an opportunity to get short. So that's what I'll do. When I identify an opportunity, I'll share it here. But for now, I'll sit and wait.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.