TO BUY OR TO SELL THAT IS THE QUESTION

I posted some really aggressive targets yesterday for the SP 500 in the 1571 area. This does not mean I think we are going to reach those levels. They are simply possible upside projections to keep in mind if the run keeps going. The only way I use targets, is when I am in a trade that I think can really roll, I use them for exits. If I were long here in the ES which I am not, I would NOT be trying to hold for 1571, no way! I don't really have an opinion one way or another about whether or not we will get to that level or not. We are in a bull market, so surprises for the most part should come on the upside.

In the mean time back at the ranch, we do have some short term things that are potentially setting up for a short term trade on the down side. You can see one of my tools is showing some divergence here, which draws my interest a little bit. I have marked off the recent divergences with this tool, and you can see they all spotted a good short term move that quickly followed. I think this one is a little different in that it is what I call a running market. This means were are just moving along with almost no pullbacks. Divergences in situations like this are much more difficult to trade, and I don't trade them stand alone. There is going to have to be a dip and re-test of the high in some fashion for me to get interested on the short side here, if I do at all. I have seen many instances of divergences like this just working themselves off, and the market continuing onward for quite a while.

I would not get too wrapped up in what this line is, it is notoriously difficult to work with and I do not use it much anymore in my trading. However, I thought it was worth posting this as I stumbled upon this yesterday. We have had two consecutive outside bars which is somewhat unusual.

Here are the results if you sold at the low when there were two consecutive outside days in the ES and exited when the RSI(2) closed under 35. You can see this is certainly a terrible pattern in general to enter a short trade today on. These results are over the last 10 years, so you can see that we have only had this pattern 6 times where the low was taken out the next day. This is not enough occurrences to base anything on in my opinion, unless there was a very strong bias indicated. If anything here is what you could do with this.

This shows buying at the low of the second outside bar on a limit and exiting at the first profitable opening. I still feel there are not enough instances of this for this to be a trade I would do, unless there was something else backing it. However, the point is that you can see if anything there is a bullish bias over the very short term with this pattern, not a bearish one.

I know we all trade with different entry and exit techniques, I just discuss here what I use. For me net net there is not a trade here today, even though I am looking for a potential short term trade on the short side here at the moment.

Good Trading