Here we are in the midst of this rally in the S&P in the face of a seemingly questionable economic climate. How can this be? If we keep things simple which is of paramount importance in trading, look at the chart on the left.
Bond prices are rising (rates dropping), and the commercials are increasing their long positions on the rally in price. This does come at a time when typically we see lower stock prices.
Both of the above mentioned conditions are conducive to rallies, and we have the cyclical election rally bias at hand as well. It is yet to be seen whether or not a decline will happen into the OCT/NOV time frame. As long as the bond rally holds, I do not think a big drop will occur. If one does and bonds hold up well, we will have a very good buy setup to take advantage of.
I have not as of yet established a long stock position, so I have missed the boat so far. However, I am content to follow my rules for entry and wait for them to line up properly. I am more concerned about being correct when I enter, than catching every single move in the markets. I do not have any good short term sell patterns at hand, so nada here for the moment.