3/5/10 Morning reflections

I got into a DELL short yesterday in anticipation of a downward move today.  I saw three Dojis in a row which to me indicated some weakness in the intermediate bullish rally.  I was looking for a one day or two day correction to profit from some shorts and get some good entries on some new long positions.  I was surprised by this morning’s action, a strong green candle bringing the SPX straight up to it’s next resistance at 1131.  It is a good thing that I was waiting for further confirmation to have create any more risk exposure on my bearish play.  DELL is failing to break it’s short term resistance on the 30 minute chart (13.79).  Although as I speak it is resting it.  My protective stop (worse case scenario) is mentally set at 13.90 but I will take off half the trade if it a candle closes above 13.79 on the 10 minute chart.

I have no regrets closing all my long positions a few days ago because upon review, all of them had shown some serious worrying signs by making lower lows on the 30 minute charts.  So far none of them have recovered except for JDAS, and this one only did so on a very strong opening candle on low volume.

My take now is that the markets will probably melt up to the 1/19 highs and resume the major trend in the same fashion as it did back in July.  Defying all oscillators and overbought signals.  These should be seen as secondary indicators – second to price action anyway.  A lot of people disobeying this rule should create some short squeezes which should help propel this action.

As I write this DELL has printed above 13.79 on the 10 minutes, I just covered half my short position and will continue to monitor it closely.  I still believe in the possibility of a one to two day correction, but the golden rule is trade what you see, not what you think.  This means I would be getting into bullish day trades if I could.

Good Trading!

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