Last night I wrote that the Dow futures had popped above an upper trend line which had been resistance over the past 3 weeks. Take these three points, the 5/2/11 high at 12873, the 5/11/11 high at 12744, and the 5/13/11 high at 12713.. Draw the trend line.
Yesterday’s settlement was well above this trend line.
I wrote yesterday that the risk/reward looked sketchy. Sitting 350 points off the highs, buying a dip looking for a run back up for 350 points, was not that good of a risk/ reward.
I cautioned to make sure you used a sell stop if you bought yesterday. I did not buy for myself yesterday.. I am more interested in the 12,600 level or the 12,700 level being violated to the upside before I get bullish.
Seasonally, the old adage, “Sell in May and walk away”.. I have always tried to follow.
In general, we are entering 3 of the worst months, historically, to try and catch any significant upside trend in the stock indexes.
Look for support in the Dow futures at this 12,400 level this was old resistance in Feb and April.. There is 150 points of down side risk here. If 12,250 holds we could catch a bid.
Again, if you are trying to pick a bottom here, you MUST use a sell stop.
In the S&P cash, look at 1315 to buy on a flush.
That is all. My point for the day, however, remains. Technical Analysis is not fail safe.
It gives you a reason to initiate a trade. Once you have the trade on, you have to manage it. Trade Management is more important, I believe, than trade selection.
That is all
CER
