S&P 500 Futures traded in a 5.5 point range overnight to continue the narrow range based trading that has taken place since the ES broke above 1300 yesterday at noon EST. Market participants are uncertain and cautious as the S&P 500 sits just below key resistance after seeing months of continual gains. The DOW is actually trading above its similar key resistance point and the NASDAQ is only 100 points below its high from back in 2007. But the point is that investors and traders are exuding caution at this price level.
Think about this. Equities have seen a run-up spanning almost 6 months and almost 300 points (S&P) without a dip of more than 55 points in the process. Following this type of move the markets are running into the upper limit of key resistance for the first test of that resistance. Would you be willing to put your money on the line and buy here? Trust me the smart money is not buying here. I am not buying here and you are not buying here. Last Friday's sell-off confirmed to me that the topping process had officially begun. Up till Friday I was only speculating that a short-term top was forming. This is why I finally entered my swing short position as we retraced upwards. It was an aggressive entry, but I am only aggressive when I am confident.
In summary; I continue my short bias amidst bullish illusions.
With that said, I can't predict the market, I can only make educated decisions based on analysis and determine when to enter trades based on favorable odds. A close today above 1310 (ES) would surprise me and force me to reconsider my short bias... at least temporarily...
Wednesday, February 2, 2011
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