Four trading days before Christmas with next week's trading more likely highly unpredictable with Congress going into recess and a shortened trading week making traders 'itchy' if the Grand Bargain negotiations remain unresolved. Investors are naturally on the sidelines while uncertainty is the order of the day (or for months already).
Basically, Dow Jones and Nasdaq have become out-of-synch quite dramatically during the rally from the Nov 16 bottom:
- Dow Jones: img15.imagefra.me/i5cj/aarc/141u_436_ubk...
With such dichotomy, it is very hard to anticipate what will happen in two to three moves. Higher probability is that Dow Jones is going to complete the i-ii-iii-iv-v rally then go into an a-b-c correction. Nasdaq is highly unpredictable thus if Dow Jones's a-b-c pullback proved to be shallow then Compq can possibly form a 4th wave after Dow Jones completed the a-b-c run down. However, if Dow Jones a-b-c down becomes too deep; then Compq will more likely become an A-B-C up and suffer an A-B-C down that should retrace at least 61.8% of the A-B-C up OR go into a i-ii-iii-iv-v meltdown - which will further complicate the differences between the two major indexes.
* SnP500 is either a Potential Complex Spiral Meltup (on Intraday Chart - see last Instablog chart) OR is undergoing a Triple Combination up. That's the name of the game. When DJ and Compq are out of synch SnP500 will usually resolve the conflict by either going vertical rally OR by going vertical meltdown. Right now, SnP's ADX reading is 12.46 on the Daily Chart - which is already very low - which means it can already support either a strong rally or a strong meltdown. How low the ADX can go and when will it start rising in which way the market will go we simply do not know. ADX can go as low as single digit but most of the time will start going up after reaching the low teens. ADX rising above 30 and up means a trending market - either up or down. Going downward below 30 usually means the start of consolidation phase that can take a very long time before it reach the teen levels or the upper single digit readings.
I usually took profits during the last 3 Santa Claus Rallies in early January. But this time around is quite different with a Potential Fiscal Cliff Crisis looming come early January 2013, With that in mind, taking profits pro-actively is the better course of action
Thus, I will reduce my long positions by 10 to 15 percent on or before Friday this week (from 130% to 115-120%). Will sell some SSO Day-Trades bought in June and July lows and sell some Intel, Microsoft, and perhaps some IBM bought recently. Also will start taking some profits from NOK bought in late May to July as it approaches the channeling resistance in the $4.40 area - with an equal move target of $4.28.
* Already sold the 1/2 SSO bought in Nov 16 bottom when their Trailing Stops triggered last week.
** Will try to keep the NQ and YM longs bought at the Nov 16 bottom. Have already sold the December contracts and renewed the trades with March contracts.
*** Will tighten further the Trailing Stops on all Day-Trades and Swing Trades including the INTL, MSFT, and IBM buys. Don't know what to do with the AAPL bought at $505 and $512 in Nov 16. AAPL is still a potential Expanding Flat Pattern from the April 10 top to possibly last Monday's bottom of $501 as the C-wave (see previous Comments for AAPL EW Analysis). Have sold 1/4 but still holding the other 3/4-th positions.