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Defcon 2

Jan. 20, 2011 12:35 PM ET
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aarc's Blog
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On Your Feet!  = Defcon 2 that follows Defcon 1 (which was = At Ease ... But Be On Guard).

The much awaited Momentum Divergence short signal triggered yesterday for all major indeces except Dow Jones on the daily chart.  Today, Dow Jones divergence sell signal triggered.

However, there are two sides of the equation since the SnP500 is already trending on the daily chart:

-   img40.imagefra.me/i51k/aarc/141u_0bc_ubk...

-   img40.imagefra.me/i51k/aarc/141u_77f_ubk...

It is now a Battle Royale between the Trend Traders against the Contrarian Traders at this stage.

For me, the daily and intraday charts still favor the bulls (for at least another higher high rally) since there is 65-70% probability of success for trend traders when they start using the 20ema as the major support when the ADX is trending.

But since SnP500 was able to reach the minimum Nominal Target of 1292; I sold 1/2 of the SSO longs (bought last Jan 07 as an Intrepid Trade) this Tuesday and holding the other half 'just in case' Spx decides to go for an Extended Rally.

Don't blame the 'smart' bulls in raking in as much profits as they can when target(s) got hit.  It is the most prudent way of trading the markets when price reached at least the lower portion of the 5th Wave Nominal Target Range.

Also, this is the "8-th" week of consecutive rally which is usually the "danger" reversal number in many occations that I have encountered when counting the (daily) charts with bar-by-bar method.  However, I have not seen enought 8 weeks of consecutive rallies (or sell-offs) to be able to gauge the weekly charts' statistical performance parameters.

Good Luck.

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