Once the Dow got above 12,000, I thought we would grind higher up to around the next resistance at 12,733 which was the May 2008 high. In the last 5 weeks alone, Dow Cash rallied 1,465 pts from bottom to today’s and last Friday’s high at the 12,390 level.
Perhaps the market will use the events in Libya as an excuse to take some profits. Certainly a 200 point down day with the market at these levels is not as important as a 200 point down day when the market was back at 6500. Remember, its not the size of the move, its the percentage move that matters. A 200 point down move with the market at 12,390 is 1.6%. Hardly worth the NBC camera man walking down Wall Street with his camera raised to the windows looking for falling bodies.
In any event, I like selling some Dow and S&P here, looking for a further correction.
Dow cash has support at 11,831, 11,658 and 11,485.
S&P cash has support at 1279 and 1258.
The S&P has rallied 170 handles from its late November low at 1174 to today’s high at 1344. Looking back, I liked 1300 as a target for a long, long time. It was also substantial enough for a lot of players to get long above that level. Hence the follow through rally up to 1344.
Bottom line, I am still friendly to Stock Indexes. These are dips to be bought.
However, you have to buy these levels with tight stop loss orders. The moment you get filled on your futures, enter the sell stop below.
Bottom line, we are due for a breather after impressive rallies over the past 6 months. How much did we rally? Try 2,786 points in the Dow since the July 4th weekend panic fest on CNBC.
Try 334 full points from the July S&P low at 1010 up to last Friday’s high at 1344.
How big of a correction we have is any one’s guess. I think its time to 1) take profits on any longs, and 2) look to trade this market from the short side, covering shorts and initiating short term longs at the levels I have marked above.
Good Trading
CER
