SPY showed a small loss although future showed a .75% loss yesterday, which is more significant. On SPY, my hope is to pick up something in the 149.1 - 149.5 range. The market will likely show a little less conviction as a well-needed correction develops. The couple sour spots to note is that RSI is over 70, SSTO is over 80 and MFI is over 80. VIX:VXV is around 93%, which is generally not a bright spot on inverse volatility. Also IWM has been softer than SPY and DJI has shown more strength than it's higher-beta counterparts.

Personally, I suspect that as long as you grab a good buy point, this will be a good trade. Even if we start another 6 week contraction, it will not likely go straight down, so just do not buy too high.
 
 
This is the frustrating part of being patient and waiting for proper entry points. Grinding 3rd waves are slow and you just have to wait for it to finish once you get out to take a profit. The market has had every opportunity to correct 1-2%, but the bears are almost absent. Well, like every war story ever told, you do need to fear the silence. Peaceful days/weeks were set-ups for ambushes, and frankly, at this point I am just waiting. The market is extended 7% over it's 200 SMA and that's about the max that I have seen in a year before some correction hits. The bullish percentages are higher on all indices than prior to the fall in May 2012. The number of days extended are getting back in the 2010 range, when the market did this for a few months prior to the flash crash. Personally, I do not trust an overextended market with a sub 15-VIX that will not touch it's 20 day EMA. You cannot capture every movement in the market, so no need to chase. This is a long investor's market, not easy for swing traders.
 
 
SPY daily RSI levels are now at 69.48 (70 is officially topping) per stockcharts.com. MACD is 1.628, which is just slightly under the previous market tops that we have seen in the past 2 years. Bullish percentage for SPX and NDX is at 6 month highs. Oscillators are nearly all maxed out and showing divergences from prices. Lastly, we are approaching the top of the bearish wedge that we have been watching, with the 20 week EMA pulling as hard as it can not to pass through the bottom of the wedge. On the VIX, we are at unsustainable low numbers at 12.5, with a 50% VIX drop just during the month of January. Now to be fair, pricing will have to fall simultaneously with the 20 week EMA through the trendlines to begin any expected capitulation in the bull market. However, keep in mind a price drop past 144 would do exactly that. If it was not for the trendlines which look like they cannot contain price much longer on either the SPY or VIX, I would tell you that we just experienced the head in a head and shoulders pattern. I would look for a coming drop to 136 again, followed by a rise to the low 147's, then a large crash to the mid 110's. But I am torn on this. We may see a rapid drop without the right shoulder. At any rate, we will be playing bear set-ups at this point. The market may peak slightly over the top trendline creating a headfake. Keep an eye on market action. The market should not have more than 1-2% left to rise. I would not chase any bull moves right now. The sentiment is way too bullish and many traders will get caught trying to capture the top movements.
 
 
9:15 AM - I am not real sure of what will happen here. Most classic oscillators say we are well overbought, but the market has hung in there and pushed against it's resistance for 5 days. Meanwhile the 20 day EMA has been rising steadily, so a pullback will have less to travel than a week ago. In short, it looks like there is less danger today than a week ago. The VIX is still scary low and does not offer much fuel to the bulls. RSI is 65 and once it hits 70, expect a 6 week pullback. Money flowing into the system is as high as it was since Sept 2007 according to Marc Chaikin. I think the market will likely rally until near the debt ceiling fiasco and then plummet some if not a lot. I suspect until then, the bulls want to get as much as they can out of the market.

NYMO is at a healthy level and CPCE is just short of it's top BB indicating the bears will have to cover shorts. It's not real growth, but up is up and if you want to play it, just be nimble. The main thing that worries me this morning is how high up the market is. E-mini futures are .60% before opening bell at 9:04 AM. That usually will be a gap fill, but again with the put to call ratio where it is, who knows.

There will be money to be made here for aggressive traders, but if you are patient there will be safer money later on. 
 
 
So it looks like we may get that pullback that we had been looking for. Ideally I would like to see a full pullback to the 20 day EMA, but if you see a strong reversal and we are close, you may consider grabbing it. A little drawdown won't hurt, and most signs suggest a healthy market until the debt ceiling is near. Around Valentine's Day, we will have to really start to look at that issue. For now, we have a market that barely will pull back, money coming into the system, low VIX:VXV,

The things against us on a technical point are call ro put ratios, low VIX and high stochastics. The market has been working off some of the overbought condition in the form of time rather than price, but some pullback is still in order.
 
 
If I had to speculate I would expect a little early profit-taking showing strength later afterwards. The upside is pretty limited and the downside is strong. With the debt ceiling coming up, I do not want to engage in a long only to become trapped and a collision with the debt ceiling looming. I suspect next week we will see more of the correction that we had been expecting, so for now I wait. There will be great opportunities, later, and we don't need to play movements that are harder to time exits on. If somehow they get the market to rage rally more than yesterday, it is a sell signal, not a buy signal, but I do not see a stronger day today as of now.

The weekly SPY candlestick looks like a hanging man if everything stays as is. All candlestick formations need confirmation follow-up, but treat it with due respect too.
 
 
Yesterday was more bullish than the day's action suggested. The end of day showed no signs of bear activity despite price jumping and decaying most of the rest of the day. A couple things to note: NYMO and VIX are not at places starting a new strong movement upwards, so this rally will have limits. Yesterday we talked about CPCE hitting the upper BB. Last night it closed below it's averages working off most of the effect quickly. 

Basically it works like this: We can't go strongly up until we go down, we can't go down until we go a little further up. So there you have it. A little more upwards action. A drop to maybe the 20 day EMA, and then hopefully to a new high all before the debt ceiling issue hits. If this hypothesis works out, that will create a megaphone on the charts, which is bearish and likely we would be looking at a bigger down movement as the debt ceiling process unfolds (maybe before, maybe after, there is a lot of speculation in this, so let's let price tell us it's plan)

Watch price action. If you played the bull rally here, and bought the dips, no problem, but don't hang out too long in bull until we see a 2% correction at least in the SPY. For XIV, yesterday it was just too overbought, but keep an eye on VIX and SPY. That will likely be my next bull play. Also maybe some TNA too after some consolidation/correction.
 
 
We hit that 145 marker as a low yesterday as predicted and move northwards. There is a bullish element in the air with strong closes yesterday and to some extent the day before. Emotional buying seems to be bearish, but algorithm and technical buying wants more. $CPCE (put to call ratio) hit and pierced the top BB yesterday and that is a classic buy point. What this could suggest is short covering, but again up is up, so for whatever reason this is important.

Also, weekly MACD is pointed northward and had a recent bullish crossover. So our main focus is still upwards.

But, the technicals are mixed. SSTO is 90, and if it drops below 80 we need to respect it. Still some good gains can be made while the SSTO remains above 80. RSI(5) just came off the 70 marker, but it can bounce up there for a while too. RSI(14) hit 30 more recently than 70, so a longer term upwards bias is still assumed. $NYMO and $VIX are bearish, but do have room for a little more bullish movement. $VIX has had 6 down days straight, and that is not bullish heading forward short term. % of issues over 20 day is something like 80%, although it's not right in front of me at the moment and that is the highest in 6 months.

What I suspect will happen is today or tomorrow will offer some relief to the bulls, but I do not think we can post a strong leg higher until we work off more short term overbought conditions. Maybe a little grinding action upwards is more likely. For XIV players, VIX:VXV is .82, which means the conditions are overall ripe for gains even if SPY is flat, as it mainly has been. Just watch out for heavy losses on the SPY, since XIV is not bulletproof.

If I was a day trader, I would be looking for opportunities to buy dips and sell rips, but since I am not, I don't know if the market has a full 3-5 days bull effort in it yet, so I would like to see a better set-up. If you are more flexible than I am, give it a try. Good luck and good trading!
 
 
9:27 - Daily SSTO is 92 right now, which shows seriously overbought ST conditions. The MACD is .94, but historically should meet a high around 1.6 before another 5-8% market correction. Today I would like to see a correction to 145.00. That white line in the chart below is support. If prices breaks and holds under that line today or tomorrow at the close, expect a drop to the daily 20 EMA, which is around upper 143's. 
 
 
9:20 AM - I do not see the market making huge jumps upwards at this point. I do believe we are in a bull market for now, and the overall movements will be up, with higher highs and higher lows, but still not straight up. SPY is at the top of it's daily BB, and on Friday could not extend it's price upwards through the top of the hourly BB. There is not a lot of big news today to influence the market one way or the other, so I suspect charts will dominate. 

$NYMO (the McClellan Oscillator) also is very close to the top of it's BB.  Usually when this happens, money flow dries up from the market for a few days, which reduces short term demand and drops prices. This happened Sept 14th at the market top but then it happened again Nov 20th, which resulted in some consolidation followed by more buying. Really this suggests the two things that I foresee happening in the market now. A drop to maybe the 20 day EMA around mid 143's or choppiness/consolidation over a few days time. 

$VIX is in the upper 13's and nearing it's lower BB. This is probably the most bearish thing I can think of right now. It is possible for it to go to 13 even, but there is little upside in this and considerable downside.

Again, I am looking for new buy points, and do believe the overall tract of the market is upwards. I believe this will last several weeks, but as the debt ceiling approaches, we will get more cautious then.

Lastly, today I am starting a futures trading account. I will not be posting all my trades, until I have good experience on it and feel that I would provide sound advice, but I am excited to be starting this.