Today’ s high in the Dow markes a 600 point rally from Tuesday’s low at 12,462. As of this writing the high tick has been 13,061. The next upside resistance for Dow futures looks to be the May 2nd high up at 13,204. One caveat for those of you who like to buy on strength.. After that high on May 2nd, Dow futures fell 1,329 points over the a one month period, capped off with the low at 11,885 on June 4th.
Bottom line, its hard to get too excited about this rally. I think a lot of folks were caught short for this month, and are exiting their positions before we start the historically choppy month of August. Most of Europe takes August for vacation.. Add in the London Oympics and you have another reason just to stay away from speculative trading for the next 4 weeks when it comes to the stock indexes.
That being said, if you are looking for a counter trend idea, consider scale in selling as we approach the 13,100-200 point trading band. Again, its just an idea. Its something I will be doing. If the index rotates above 13,400, then I would exit shorts and re-evaluate.
I’d rather be establishing short positions now rather than playing on a momentum swing to the upside. The more bullish that TV comentators and business pages on the major media outlet become, the more I’d want to be selling ito the rally against bullish herd sentiment.