Market Rallies to New Highs... What Does This Mean Going Forward?

Turns out Friday's high didn't equal a top. It was an impressive two day rally to recoup all of Friday's decline and then some. I mentioned last week that there was a possibility of a break of the 1300 level (ES), so the fact that this happened now does not contradict the view-point that we are due for a correction. The current market behavior is still indicative of a top (or inflection point) and I continue to expect a move down to at least the 1250s on the ES.

However, given inflation concerns and the Federal Reserve's philosophy and willingness to print money to no end, we have to be weary that the market can continue higher. The gravity-defying price action that has propelled the markets upwards in the past 6 months is already a historical phenomenon. With that in mind, I'll tell you what factors will change my short bias;
It's simple, if the ES continues to rally higher tomorrow and closes the day above 1310, I will have to look at exiting any short positions. This just means that the correction will be delayed and I will be long biased until the market shows a new signal of a decline. In this case you just have to accept a loss (if you are short, like my current swing position). I will not recklessly hold onto a losing position. Can always enter that trade again.

This Morning

I continue to like short entries as the ES has crossed back above 1290 although I will be cautious amidst the current bullish market sentiment. Manufacturing PMI data across Europe shows growth and European markets are up. ISM Manufacturing data for the U.S. due out at 10:00am EST.

Levels to watch today on the ES:
Resistance above at 1293-1294, 1299-1300
Support Below at: 1283-1284, 1278-1279, 1272-1273

ES Retraces Almost 78.6% Back Up to the Highs From Friday

Short ES at 1289.75