IEM's Trading Blog This trading blog will include setups I see and track how I played them. I am a developing momentum chart swing trader. Draw your lines and take your trades, Cheers!

With IWM making new high, SPY & QQQQ very close to new 2010 highs and a better than expected job report (that U.S. might actually created job if not due to the snowstorm), should we go out and be heavily long? Everyone involved in the market sounds giddy and bears that wanted to short the market is close to stopping out of their positions (very clear stop losses above the 2010 highs for SPY and QQQQ). Is it time to be cautious? or at least only buy the lagging sectors betting on sector rotation?

The 2106 McClellan Oscillator is very overbought short term at 75, which anything over 50-75 suggests caution for correction or at least sideways action. Furthermore, this oscillator has come all the way from -50 to the current level. What happened if you were selling/shorting at -50 in late Jan or mid-Feb? However, be aware that tops takes much longer to form and usually it create a negative divergence before rolling over. The McClellan Summation index, on the other hand, is showing a clear negative divergence vs. the market since October.



Its clear that the lows from Feb were caused by some shorts covering, but I believe a bunch of buyers have came in starting around the last week of February. The psychology has shifted from "sell the next bounce" in early Feb to "this bounce cant last" in mid-Feb to "I am going to miss out" in late Feb to "we need to pay up" in early March. There will be a couple more stages - "I cant believe this is going higher" and "I will buy the next dip".

I continue to believe this market is a buy the dip market that traders should focus on spotting the next hot sector and buying the individual stocks (funds will focus on eps/revenue growth and accumulate when its favorable). I believe sector rotation will continue. My plan would be:
- focus on strong individual stocks in lagging sectors
- take profits as they go in my favor
- be aware of the shift in sentiment

However, I will not put on much size at this moment unless there are some correction that clear some of the giddiness in the market. The most important thing I should remind myself is... please take the good r/r setups and let the tape tell you when it stop working.

I believe Semi, Tech, Energy and Materials might be ready to make a catch up move as they have a high number of revenue from foreign countries. Dollar appears to be overbought and have multiple negative divergences. Baltic Dry index had a fairly good pickup last week.

I will be back to post some setups later tonight.