Market Seems Destined For Higher

With the market only pulling back in corrective fashion off the recent high, the market seems to be signaling we still are not done with the upside.  But, before I provide a little insight into the pattern, I want to include something in this missive which I posted in the trading room yesterday:

“You know, one of the things I always consider when I look at my positioning is if the risk is worth the potential profit.  When I look at a market like this, and recognize how fast it potentially can turn down, I come to the conclusion that the risk outweighs the potential benefit for me personally, especially since I have become much more conservative in my holdings. 

But, that does not mean this is the same for each and every one of you.   You must make this determination yourselves.  No one is the same and this determination will be different for everyone.

Now, one of the other things you must consider is where is your risk management point.  You see, I am told by so many others that you have to hold on to the bull market positions and not sell to early or you will miss a nice part of the run.  Well, consider that if I sell at X, and the market goes to X+300, where do you allow yourself to stop out?   Many people that are greedy and do not understand the market context will likely sell out even below where I sold before the market topped . . . and I slept better at night, especially with my money earning 5%.    

These are decisions you must make for yourselves.  I do not know for certain where the market will top.  But, I am quite confident that we are in the late stages of a VERY long-term bull market move.  While we still can push higher in the coming months, you have to ask yourself how much risk you want to take, and you MUST set yourself a pre-determined risk management plan so if the market does turn down hard, you are NOT holding all the way down hoping.  Remember, "hope" is the dirtiest four letter word in an investor's vocabulary, as well as the most dangerous for their account. 

And, btw - I am still holding certain choice long positions in equities, but the majority of my standard equity exposure has been moved to treasuries, cash, or TLT (of course, outside of the oil and metals complexes).”

So, as the market stands right now, we have a lot of overlapping structures continuing to push us higher and on many different wave degrees.  But, without any clear indication that a c-wave down is taking hold, it seems the market is going to make an attempt at the next resistance region in the 6114SPX region.  Our current smaller degree support sits at 5950-5960SPX.  It would take a break of that region to suggest that some larger degree decline may be in progress, and potentially even still take us down to the larger support in the 5560-5570SPX region.  But, there are no indications for a drop that deep at this point in time.

The last point I would like to make in this update is that we all know that markets can continue to extend beyond standard expectations.  Yet, the negative divergences that have been seen for months on the daily chart will ultimately result in a top, and when we see this much divergence, it usually portends a strong reversal.  So, again, PLEASE have your risk management plan in place before you need it.