Market Jumps Up

Just like last Monday, the market gapped up higher. If you listen to CNBC or any of the other financial news programs, they will tell you the 10% increase in existing home sales (for October compared to the prior month) fueled this morning's rally. It definitely didn't hurt, but that number really is not a big surprise as sales were influenced by government tax credit incentives that are coming to an end. The real factor in the Gap Up is the fact that the US Dollar sold off quite a bit in overseas trading on Sunday. If the dollar gained over the weekend, the market would have gapped down, so don't be too enamored by the home sales data.

Those of us who continue to hold their short positions had a minor scare as the SPY briefly made new yearly highs ($111.74) in the first 1/2 hour of trading. As usual there was low volume and not enough momentum to sustain the rally. The fact that the market declined for the remainder of the day, is a reassuring sign for the shorts. Yes, I still hold my Short Position. Patience is key. Normally I would not be patient with losses, but because Market Tops can be volatile and often take time to play out, I continue to be patient and hold my Short position. I can't say it enough, but the weak volume combined with repeated failed breakouts, lead me to maintain my belief that these markets will dip back down. Time is running out though as the market could easily stop me out at this point. Like I said before, if SPY closes above $111.80, I will cover my position. The next step that must happen for this Short play to work out, is that we close below the $108.90 to $109 level. I was hoping this would have happened last week. The fact that we closed above that level makes this morning's rally not as much of a surprise.

In regard to the $108.90 to $109 level, if you look back to Friday, you can see that SPY reached a low of $109.01 at 11:40am. This is .1c away from the Scalp play I called on Thursday. I mentioned it was a potential .70c play. As you can see, the high towards the end of the trading day was $109.76, a .75c play. Although it would have been an even better move to hold the long position through the weekend and into this morning's Gap Up, I generally make it a rule not to hold positions over the weekend, unless I am already playing a swing trade.