The Daily Dose of Trading Comments

Just a couple more thoughts now that I've ran the numbers and digested what took place.

Volume - A big negative today. It was average volume most of the day but really picked up that last hour on the selling that swamped the market. I've comment throughout this rally that volume would be a tell and that the tell was negative. Today was clearly a day of distribution as those who wanted out didn't wait for the best price to execute that decision.

Precious Metals - Something is up with the metals. They had a good reason to get crushed today but didn't. In fact, silver squeezed higher. Volume is not huge but respectable and something tells me that these markets are likely sniffing out something here. I'll be looking to get longer as a result.

It was a good day in the markets finally as we appear to have a crack developing in this relentless push higher. Having expected that and positioned to profit by it allowed us to navigate well despite not getting any early follow through. A gap down on CSCO this morning was welcome news and the fact that INTC finally faded back below it's last gap up from Thursday signal that the frothy is starting to look; well indeed frothy.

The one thing I did not do today that I should have would be to move down to the next level and chase some of the continued strength we are seeing. For example I was looking at IRIS this morning before it got goofy. What a move there.

This bifercation where the small caps are still attracting dollars yet the big caps are pulling back signals that the pullback is like upon us yet there are still momentum traders willing to chase the goods in stocks that are still showing momentum. That tells me that the thought we have that the correction may be reasonably significant on the point scale, it will not likely be too long in terms of time. Tomorrow will give us a good indication as the late day weakness today is definitely a change in character finally.

With a couple hours to go those pesky dip buyers are back at work and trying to drive the indexes higher. I'm waiting, watching, monitoring and deciding if and when to short again. The buyers look a bit early today but with it being the last day of the month, the desire by the big boys to keep it up here is likely great. We may yet get a good short entry again before the day is done.

General market has held the lows but this slow push higher intraday looks like a failure pattern. My bias is still down and I'm looking for an entry point for some short futures trading as the day wears on.

After being broken down for months, the precious metal stocks are no longer falling despite continued pressure on the bullion. This is a divergence worth noting. I've taken a small stake in this group and am thinking it might be worth expanding.

Those pesky dip buyers showed their optimism off the weak opening but they may have walked into a bit of a trap today as the market is taking a bit of a spill now. I added to my short positions on that strength and am looking to continue working the short bias today as long as it makes sense. So far that view is finally bearing some fruit.

Chips started strong and seemed to be trying to set the tone for the market early but they have since failed and turned red. Month end window dressing or not, the market looks ripe for that pullback we have talked about and is struggling this morning pretty much across the board.

The stocks futures are trading lower as the European markets are dealing with the fallout of the French vote today and futures are lower. The dollar has strengthened against the Euro. Sounds like a lot of behind the scenes turmoil doesn't it.

A week ago I updated the thesis to suggest the need to be more two sided. I specifically said that "I am thinking that we should use strength to consider short positions going forward and dips to make some additional buys. A good 10 to 15 point move higher on the SPX, for example, would be a good place to consider short positions for example." We are 10 points higher as of Friday's close and I have put on a number of short positions as we inched higher.

My thought is that the market is likely to get a sharp pullback in terms of price sometime this week. Given the way this rally has unfolded, it's likely to not be a long pullback though in terms of time. Today may be the start of that although it is end of month and there's a desire to keep the prices up here ... at least today for month end closing prices. I definitely would not be chasing new positions at this point but instead to pick and choose among the hot stocks for individual quicker type trades as the risk/reward equation doesn't favor most long picks at this juncture. As a rough measure of how tight the rubber band is starting to get stretched, note that the number of stocks with an overbought reading on their RSI is starting to get reasonably extreme.

They jammed them as best they could and almost got the 1200 mark. Volume has been pathetic of late and today was no exception although it was in front of the holiday weekend.
There are a few events that look to unfold this weekend that could affect Tuesday's trading. There's the situation in Saudi Arabia that's unfolding that looks to be benign but you never know about that region of the world. There's the EU votes as well. Then comes the economic data again as well.

As you know, we are extended but the desire for a pullback goes unanswered. That fact continues to slowly drive others into transacting at the current prices. Momentum is always a hard thing to kill. I really need to take that last nugget to heart as it's been my downfall more than once.

We are basically at the highs of the day and I'm going to start a short position in the QQQQ here. Of all the shorts, other than one problem child I'm comfortable with them as they are decent shorts on decent setups. With volume lacking, with the market extended, with my short term oscillators saying we are going to have a difficult time pushing much further without a respite, I'm going to take this short as when the decline sets in I do not want to be tempted to just bail out of all these long positions I have but instead to add to them on weakness and use these shorts as profit material in that time frame.

The risk is, of course, that this market doesn't come in at all. I doubt that. It's a matter of when, not if. I am more short than long at this juncture.

It looks to me that they are intent on jamming the SPX up to that 1200 range here as we near the stretch run.

I'm working on adding a few more long shares to the portfolio but the pickings are a bit slim and with the lower volume it's even more tricky.

Even though this market needs a rest to refresh for the next push, it simply refuses. The refusal tempts those who wish to be long and those who are caught in bad shorts to give up and join. That's the nature of the beast. I continue to look for and make adds but I've very two-sided up here as I expect we get a sharp short correction be the end of next week at the latest. I believe that buyers will appear afterwards though and begin picking at this market again. That will mark the last chance for volume and internals to show promise. If they don't then we likely have a topping pattern forming. That's the way I see it.

It appears there is a desire to book some gains this morning as profit taking has set in. First time in a while that we have witnessed this. Seems quite orderly though so far.

In 3 or 4 hours this market is likely to be a sleeper in terms of volume. That will leave even more opportunity for the programs to jerk the market around. This market has continued to provide little opportunity for those that wish to exit or to enter to do so. Yesterday we gapped up and held that move all the way to the close. That's pretty bullish behavior and continues to reinforce the idea that any kind of a top that is to come is a ways off still as the first real pullback is likely to be bought.

After today we have but 7 months left in the year. It has been an agonizing year to try and make money in the markets and all the primary indexes continue to show red on the year even after these last 2 weeks of non-stop rally. I don't know that it's going to get any easier either as we move through the remainder of the year as it's likely to be more of the same. There have been 3 good moves so far this year and I've yet to catch the meat of any of the moves. Usually we only get 3 or 4 good intermediate term opportunities in a year. Maybe this year will be different and we've yet another 3 or 4 turns to go. With what I've seen so far in terms of fickle behavior, that may be indeed what we get.

The momentum train continues. I finally got some good trades in but continue to pay for earlier bad decisions. It's not that often that you call the moves well and fail to profit but I've found a way to do so of late. Depressing to say the least.

Tomorrow is likely to be a low volume and whether the bulls book gains or press the bears remains to be seen. We'll just have to show up and see.

If you pull up a chart of volume associated with this rally over the past 4 weeks, you will see that, on average, volume is declining as prices are rising.

The same is true of the listed issues. Although this situation can continue to occur for some time to come and although initially it isn't a concern, when a rally doesn't broaden, doesn't expand in terms of price and in terms of new highs, then that rally is living on borrowed time.

Some time back I talked about the need to watch the volume story unfold as the market rises. That story is not compatible with the thought that this market is the beginning of a longer term bull move. Considering that we are 5 weeks into this now without much of a rest, I would consider the rally as maturing at this point. My expectation is that we will, at some point soon, get a shake out and then, if volume doesn't pick up, we will likely see some sort of slow topping process start to take form.

That suggests that you work both sides of the table here and look to buy the first shakeout again but then watch closely to see if the underlying internals begin to change in terms of volume and new highs. If not, we are likely putting that topping process in place.

I'm increasing concerned that the Energizer bunny is going to turn and fall over here soon. It's likely to be dump then pump kind of move, but if you are getting longer as we get higher in price, you run the risk of a little Fear Factor when the dump move comes.

The internals are solid so far but I the volume numbers aren't higher as I previously thought. We should see volume dissipate as the day wears on and heavier volume early would suggest more to this move if indeed it where true. As it is, doesn't change anything.

I'm viewing this market more and more from a two-sided view as I put short and long positions to work. I know I sound like a broken record but the odds of a sharp painful pullback are steadily increasing in my opinion.

With Memorial day approaching, a market stretched, and a lot of poorly positioned longs and shorts, we have a volatile mix in front of us. Volume will be worthless as a read the next few days and the trading could be choppy as the programs do their thing.

I was looking for a pullback this week but the dip buyers are on the watch and they are not allowing these initial dips to go very far before they get to work. Some backfilling is due but yesterday's meek attempt to move lower probably has more folks wondering if lower is even possible anymore. Three short weeks ago, they wondered if higher was possible, now it's the opposite.

I would not look for late day strength today. There's a push underway but it's too early and too weak. Look for some lower numbers into the close is my take.

Volume is about average and internals are reasonably negative. So far looks like a reasonably pullback. The problem is a lot of folks have a lot of money to protect and if we don't get much of a move higher we may see the profit taking pick up.

Market really struggling and I can only say it's about time. The timing finally seemed right today and if it develops as I think we could see some good selling today and over into tomorrow. I'm looking for some long entries as we come in and will look to start covering some short positions as well if some sharp selling sets in.

The early bias is bearish again today and I have a sneaky feeling that today it likely sticks. Again, the chips and the financials are the key and I'll keep a close eye on them for strength.

When I see a stock, or a market go straight up, it appears weaker, not stronger to me? A market that climbs back and forth slowly working it's way higher is a lot healthier market that simply spikes straight up. The latter is what we have right now.

As I've said before though, it doesn't mean it will collapse suddenly and completely but a sharp pullback at some point is in the cards. Overbought can get more overbought for a while. When the jerk back down comes though, in this market, it's likely to be one that lasts a couple days and a good many points and then look for the dip buyers to step up again.

Memorial day weekend is fast approaching and usually the day before these holidays are bullish. Given the current market penchant for printing higher prices, today works for a pullback. If they crack 1191 on a closing basis then the pullback is unfolding.

18 out of 19 days up on INTC all on so-so volume. I believe that this fact is a very apt description of what is happening. The rotators simply picked on a sector that was down and out to rotate to and they buy any kind of intraday pullback that materializes.

The market is setting up for a sharp correction but from what price level remains the mystery. My thought is that we will want to buy into the correction still because whatever type of topping action is taking place, it will take a while to play out if it in fact is happening.

With an hour to go, each push to the 1190 SPX level is met with buying. Those buyers eventually are no longer there and the next support level is sought after. The NDX has shown relative strength thanks to chips, biotech and GOOG although the latter seems to be running out of steam.

I've not found a day trade all day and am quite interested in the buying strength into the last hour here. Just looking for a clue that the back filling is imminent. There are subtle signs but enough rotation and short covering to keep it at bay so far.

Fed not done it seems and I don't see how the market continues to rise on such news. We spiked up and down on the news. Jumpy mixed up market still. Guess they are counting on late day strength again. I remain pessimistic very short term.

The Fed notes are being talked about quite a bit today as they may show the Fed is ready to stop. My understanding of what the Fed has said is that they are not yet ready to stop raising rates. When this type of news is ready to hit the market you have to ask yourself where the risk is. Technically the risk is to the downside from here and all that is needed is an excuse to take profits. I'd be wary in front of such news.

Take a look at this chart of the SOX (chips mainly). It has moved right up to the down trending line from a year and a half back. It has done so on a straight up move off the lows. Can it go farther? Sure. Is it likely? No. My near term pessimism is expressed in charts like these.

When a market feels like it will never come in it's getting close to doing so. One thing I've learned though is that topping patterns (and this may or may not be one) take a while to work themselves out and the buyers are reluctant to give up the thought of higher prices. This market feels that way right now as the buyers seem to still want to jump on any little decline and make a bid.

I'm fairly inactive here as the technology shorts refuse to come in yet and the HANS short is finally doing so. I'm prepared to wait technology out though as it is likely to be one of the last to succumb as so much of the recent rally has been fueled by that sector ... and thus the reason the money keeps buying there. When they turn though they will likely give a quick hard pullback.

Chips; biotech; and Google is what is keeping us aloft today. If weakness develops in these areas we are likely to see some more serious backfilling. If they hold into the afternoon, others will be tempted to join.

Underlying statistics show general weakness today despite the above.

Over the years I've found it to be useful to public air my dirty laundry. You might think that this is odd and I'm sure your not used to it as most pundits will talk only about what they do right or talk in general enough terms to always appear right; but not this one. I make mistakes. I make them all the time. The market is all about mistakes. That is a necessary truth. No one; I repeat no one person knows what will happen next. We do have clues and if we read the clues correctly we can get a sense of what might happen but they are only clues.

The people who consistently make money in the market either manage their trades and trade execution well or they are in the know (they have inside information). There are very few of the latter but they have big bucks and they do move things. The rest of us are left when smart money management or tears.

Lately I have been spot on with respect to what the markets clues were and hopefully you were able to use that to make and stash some cash. Lately my money management and execution has been weak; quite weak. I have to change that. I've entered into traded with leveraged vehicles poorly and have had that leverage used against me. That has been the primary problem. I'm moving to correct that.

When you are having a tough time of it, you too need to try and step back and see what is and isn't working and, once assessed, take steps to correct the real issues as you see them.

Bias is lower today. That early spurt was the chips taking us higher again on short covering and again on low volume. When the big caps start to weaken, and they will, then we will get the chop and drop action. Today is a good candidate from what I can see.

The futures are down below fair value. There is minor support at 1190 and I would look for an early bounce from those levels. Everyone wants this market to pullback either to get out or to get in. What is most conspicuous is that the market continues higher on lower and lower volume.

I would advise that it is quite dangerous to chase this market higher and in fact the higher high yesterday on the daily SPX chart could setup the rinse move as it came on no volume. These low volume moves push prices as a factor of rotation and price gains centered in key stocks rather than broad market moves. If indeed this market has legs and if indeed real money is being put into this advance it will show up in volume. That is not happening and I would be very careful to assume that what goes up continues up.

Momentum and fumes is what this market is running on now as another low volume push higher just raises the frustration level for most players; this one included. There is clearly a feeling that those who want to be long do not feel long enough and those that are short feel too short. That's what happens after a long decline and disbelief. It's then when momentum makes itself most evident and as a trader I should know this by now. I've been bitten by the momentum train before either pulling winning positions too early and/or counter trend trading too soon. I know better yet the disbelief that it can carry further makes ones reasoning somewhat clouded.

This push higher on low volume truly suggests that this is a rally without legs. Regardless of that fact, these legless rallies can carry longer than most expect and the current one is doing just that. What will happen is that we will find a day soon where the buying finally dries up because those who are fueling the move higher (the ones covering shorts) finally have killed off their losing positions and the move collapses of its own weight. A quick sharp drop down is expected as a result.

That drop will be met with further buying as the Johnny come lates fill in to take positions. I say all of this because I've seen it too many times am I'll be darned if I trade it wrong this time around.

Yesterday I laid out the latest thoughts in the evolving thesis. I wondered out loud as to how far the advance could carry and considered another 10 to 15 points higher on the SPX to be a good number. Today they added 5 of those points. Look for the collapse sequel to follow soon.

Notice the way each of these advances are playing out today. The strength on each spike higher is diminished and meets with stiff selling. Fighting this tape is a good way to get an upset stomach but I'm finding it very hard to believe this tape ends green today. Again, I have to be careful not to get stubborn but that's the gut feel.

Now that we finally got some real weakness at resistance, how will the bulls react? Will they buy this dip strongly or meekly? A meek response will suggest further declines. I would expect a slow climb back higher over the next hour or two and then possibly a late day failure rather than strength. If that comes to pass, tomorrow could be a crack in the bulls armor finally for a real day down.

The chips have gone red now and that's a strong sign that we may have a pullback taking shape up now. I'm maintaining my thoughts here this morning on the fade but that short time thesis has to kick in soon.

This early strength looks like more short covering to me. When we didn't get the early push down, they quickly took it the other way. I do not see significant underlying strength in the general prices but I do see the runners taking the small caps up. Unless that begins to fade we could see a further squeeze. I'm maintaing the thought that this early strength should be faded.

Note that we have finally added the current trends section to this site for your use. It's how we see the current short term, intermediate term, and long term trends of the market. Depending on your time frame with respect to the trades you make, the idea is of course to generally trade in the direction of the trend for the time frame you are trading in. Hope you find this addition useful.

Next up is to add our porfolio allocation mix percentages on a nightly basis so you can see our current macro type positioning.

Futures were soft when they began trading last night but have since firmed and are up a decent amount to start the day. After a strong week you would expect them to do just that. The question is, will there be any follow through or will one want to fade the early strength.
The fact that we are at resistance coupled with Monday morning strength certainly has me not wanting to make additional purchases early. I will likely look to short strength early for a trade when the opportunity presents itself. Tread carefully here early would be my thought.

As to what happens if the early strength sticks, there you have to be more concerned regardless of whether you are positioned bullishly or bearishly because a price that sticks into the close above resistance is going to make it might hard to get out or in. I seriously doubt this happens but one has to consider all possibilities. As is many times the case, today's trades are quite important with respect to short term direction.

A pullback toward the 1180 on the SPX would be ideal this week. Let's see if that's what develops.

ACe Talking: Back to bull, or a load of bull?

The biggest 3-day rise since last October has woken me up from my slumber, as my pension fund does not look so rosy now. Whilst many would press the eject button on their positions, my decision to be an investor rather than a trader means I can go back to sleep, perhaps with a few more shorts thrown into the pot.

Of course, you should always consider both sides of the equation, and equity markets breaking up to new highs has to be considered. However, unless we start re-writing the history of investing, breaking up to new highs at this late stage in the cycle has to be dismissed. When earnings were growing at their strongest and growth was robust, we should have been claiming new highs. Now that the earnings deceleration has started (half of companies guiding earnings lower and just a quarter guiding higher), and economic growth globally pointing to near-recessionary levels of GDP in 2006, perhaps now is not the time to be jumping into the stock market. Add to the pot the biggest decline in real wages in America for 14 years, and you have a recipe for a crunch somewhere.

The hedge fund fears that dominated just a week ago have not gone away. Take the CDO market that we have recently been made aware of. These Collateralised Debt Obligations have been the playground of many a hedge fund, and have proved very rewarding in the last 2 years. However, when we realise that over 60% of the 367 CDOs rated by Fitch include GM and Ford debt, you can imagine that there are a few trades gone a bit wrong. In other words, being long the bond part and short the equity part is a recipe for a collapse or two somewhere. Perhaps this explains the muted response of the Goldman Sachs share price last week, as they have a big share of the hedge fund market (Prime Broker), and if there is hedge fund pain, GS will feel it.

Whilst I don't want to dwell too much on the charts, I would like to note that the RSI on the NAZ has moved from oversold to overbought in 5 weeks, something that it couldn't even manage at the start of the 2003 bull run, or the late 2004 rally. It really makes little sense for me to start looking at targets much higher than where we closed on Friday, so I won't bother charting that possibility. If I add the recent move in Intel, which helped provide the fuel for this rally, then I become even more convinced, as Intel is now more overbought than it was in March 2000. No, further gains are not on my agenda. If funds want to play about with the market to ensure some options expiry pay day, then as far as I am concerned, you can throw the charts in the bin.

When we hit those oversold lines 5 weeks ago, we had a "bulls" reading at just 16.4%, so a rally should not have surprised us. Now we have a reading at 39%, we have enough fuel in the tank for some more declines

So, as an investor, I see market declines stretching well into next year. Of course, we will see many rallies, like last week, along the way, but trying to time them, and even profit from them, is beyond me. I will leave that to greater powers. I will let the market prove me wrong, but I think we are in a new cycle, not continuing the old one.
ACe

For an options expiration day, we sure saw low volume today. I typically don't try to over analyze options expirations as things get so whacked most of the time that it's not worth the effort. What I can say is that this is the third big move this year and I've found a way to miss the meat of the move on each of them. One of the things you learn in trading is that you certainly can't always be right and many times you are far from it. I do believe though that if you keep plugging away; manage your risk and protect your capital, eventually you will position correctly and make your dollars. It's the in between that's tough though as the waiting, preparing and finding no reward takes a toll on all of those who try.

I'm out of here for now. Hope you caught the better part of that move this week and hopefully booked some of the gains. It's too early to assume that the run is through but its also too simply to assume that we go straight up as that likely won't be the case. See you Monday if not sooner.

Starting to shape up as early weakness then late day strength as we thought might happen. With it being options expiration there's no telling how they pin them at the end though so I'm not looking to take on any intraday trades into the last couple hours most likely.

Right now there's a firm bid under the market and that's keep the bears from getting too comfortable here. A week ago no one could believe it would go up. Now, even more so, most are calling for a pullback. I get uncomfortable when the majority are looking for the same thing. I too feel as if a rest/pause is likely at these resistance levels but am starting to think they want to breach them first before coming back in.

Although the internals are not very pretty today you have to consider that come Monday morning there will likely be that early push due to what has happened this week. Right now I have no idea of whether that push will have any real kick to it or not but I fully expect that it will happen. Could be that it's one of those situations that you fade. Maybe not. What it does mean though is that you don't want to position short going into the weekend and if that's the case, I'm starting to suspect we may see some late day strength today given the early weakness.
I've done some incremental buys today but nothing large. Just working a few more shares into the portfolio on weakness. I prefer to stay mostly in cash at these levels and until I have more time to consider the intermediate term picture in more depth. The setup is there for a nice advance on the next pullback as that would be the third higher low and that's where the thrust moves come from. On the flip side, we are at a resistance point of significance so we don't want to be making significant purchases here but at lower prices because until the 1190 SPX area is taking out on volume, we can't have confidence of a further move higher.

Still having a hard time finding trades I like at prices I want to engage them at. So far the market is doing what we expected but we haven't been able to get any intraday trades going despite that. Patience as lost opportunity is a lot better than lost money.

The weakness we are seeing today is that healthy type backing and filling you expect. Each day this week we have seen strong finishes and I'm not sure that today will be any different. The question is whether they will sell them down enough to make a bounce into the close feasible. I'm reviewing existing positions and recently sold positions to consider adds/re-entries.

After 4 strong advances, one of which showed good volume and price moves we are left wondering if this is Alice and Wonderland or if it is real. Was the one burst day (Wednesday) nothing but short covering or will it be followed by a real break higher with increased volume along with price. That question remains and until we have an answer for that, the move so far simply validates the projection of the rectangle ... nothing more. I will look more into clues for the coming weeks again this weekend as it is time to update the thesis.

As for today I've positioned for a bit of a pullback. It's options expiration and I'm not sure that we are going to get much of a pullback here but then again, even that will tell us something. The resistance at this juncture is evident and it's unlikely given the events of this week that they will be able to take it higher. Look to the day with a bearish bias and try to play the cards that way. Given expirations you have to countertrend trade on a intraday basis most likely, not momentum trade.

I wouldn't get too comfortable up here short term. The strong finish today sure makes it feel as we can't help but go higher but ... I wouldn't get too comfortable just yet. It's more likely than not that we get a pullback very soon. Now how bad will that be? I doubt it to be serious. I wouldn't expect more than a 100 basis points on the SPY for example. What's the upside from here? I doubt more than another 30 basis points on the upside most likely.

Given these thoughts, I have shorted some SPY for a trade. As you know, I started buying the construction stocks today as well. I'd like to see some back filling in the general indexes in the coming week and would not be surprised to see it start tomorrow. Friday's are typically counter trend days as the winning side books some gains and the winning side this week is definitely the bulls.

I talked last week about a change in the markets where they buy the dips rather than sell the rallies. Look at the way we are trading today and it's most evident. After 3 big days of gains, here we are trying to weaken into the close and the buy the dips. Now had we not gotten shaken on that big push down last week it would have been easy but the market doesn't make it easy. So the buy the dips buyers today will likely find that this market is going to be more of the two-sided type market where we get some whippy moves down as well as up over the next couple weeks. When it gets too easy rest assured it will change.

I've been out for a while and am just getting back. The market is backing and filling in general and we are seeing some good healthy action on that front. Overall, it's what you would expect today after the three good days higher. The market is setting up nicely here for further moves in the coming weeks. Although I need to expand the thesis, this move looks to have further to go although I expect it to be a bumpy ride, not just straight up.

We should see a pullback either today or tomorrow off these strong first three days of the week. At this point the crowd will want to buy the dips so don't expect a big dip soon as there's likely to be bids underneath the market now.

This weekend I'll have to spend some time and attempt to game what's next. We need to extend the thesis again as the current one has been fulfilled. Time to consider what's next and to try and develop a game plan for it. Looking back, even though we had the thesis pegged, that pullback on the SPX was deeper than I expected and it shook the faith. That was the primary reason for me hesitating on loading up and for hedging short. Again, the market does it's best to frustrate the most and this latest leg up has been no different.

The market finally provided the thrust forward that we expected as follow through from the thesis we first aired here back on May 8th. Target was 1190 SPX and we are within reach of that now. The question is, of course, what's next and that's what we will have to turn our attention to soon?

Between now and then though we should expect some very short term weakness to set in and that weakness will likely be bought when it occurs. After that, we should get another thrust forward as the bears are finally squeezed as the bulls have been.

There are many charts that are just starting to show life and I'm most interested in areas where a long term trend was up and recently the sector has been under pressure. One such sector is the builders. Look at any of their charts from JOYG and FRK to BZH, KBH, and LEN. I'm looking for stocks that have defined risk and trapped shorts primarily and the home builders are an interesting group now.

The rally that we expected to result from the rectangle break, the rally that we had positioned for, the rally that we waited patiently for has come; and what did I do? I shorted into it not believing it would hold. I was looking for a fade this morning that, of course, was not the case. I, of course, took the pain and got out of the way. I've got to learn to recognize that when the momentum is strong we need to turn and go the other way. That was the trade to be had.

This market has shown that although the chips are what led us here, it's more than the chips now. This is a broad rally on decent volume and it's going to take us to the next resistance levels. S&P is 1190 and not that far away now.

I've booked some gains today but am reluctant to close out long positions yet even though I suspect we've seen the best already this week. I'll likely trim some more into the close today and will be sitting with a lot more cash than I expected to at this juncture. I hope my frustration in this trading year is not yours.

I don't know what it is and I may be proved wrong, but I'm having a hard time believing this rally this morning. Unless something kicks in soon though it won't matter as I will need to pull short exposure and admit defeat. We'll give it a bit more room but the time is near ... it's either do or die

Without the chips, the market has some heavy lifting to do in order to get higher here and I'm not sure that it can. I've been selling into early strength and got shorter as well. A bit of a gamble here, but I think the chips bleed to the rest of the market ... up lately ... down today. We'll know within the next hour.

After the wait, the CPI is released and it shows no inflation. Inflation at the PPI level but not the CPI level. Something doesn't smell right but sometimes it really doesn't matter.

The chips finally look ready to cool a bit with AMAT throwing some water on the fire. The BKX has had quite a run for the listed issues but now faces it's issues of old highs. Everything has come on low volume and although low volume advances have a way of battling higher, they eventually come to an abrupt end.

We are in week 3 of the move out of the rectangle, week 6 overall since the lows. This could go on another 2 to 3 weeks.

So we are set for a gap up opening. Be wary and watch the first pullback; do they jump it and buy and put in some new highs or do they not. I see red in the chips still even after this release. Watch them for a turn and watch the financials for the same reason.

That makes two back-to-back low volume advances, but the advance comes on late day moves higher which is interesting. Late day strength is typically associated with smart money. I don't know if it's smart but it definitely keeps showing up.

Tonight we end right at resistance points on all the major indexes. I had given up on the S&P being able to trade higher yet, here it is again; almost 18 points in two days to threaten resistance once more.

Tomorrow we get the CPI before the bell and that likely will cause a stir. If inflation is an argument we could see some hard selling. If it's not we could get a big gap up as a result. If that happens, you have to wonder if that gap turns out to be one of those fizzle trades though given where we are.

I leave the day hedged and disappointed. For someone who has been playing towards a nascent rally, when it finally gets here it has left me, like so many others, mostly on the sidelines. What else is new with this years market?

I missed the best entry point on an intraday trade sometime back on that spike that took place on apparent short covering as the prices collapsed right back down. This day is setting up as a day where the price quitely fluctuates back and forth with a downward bias. That needs to be your bias from what I can see ... just as we talked about earlier this morning.

As for new positions, I'm not seeing much opportunity. I've finally stuck a ask in on my first short outside of index shorts in a long time but it may or may not hit. Anymore, your entry is as critical as it typically defines whether the trade works or not.

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