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S & P - SeeSaw. Trade What You See, Not What You Saw.

Wednesday Evening   8 December 2010

 From red flags to white flags, sellers appear to be surrendering.  
What looked like could be a failed probe to the upside, at an
obvious resistance, simply did not develop.  Surprise, surprise. 
The government and Fed intervention rule again!  It was more
POMO intervention, [Permanent Open Market Operations], from
last week that ramped the market up from a likely breakdown to
a 4% recovery rally, and it looks like it ain't over yet.

 However, the reversal of fortune, as it were, helps drive home a
salient point.  Always trade what you see, and not what you saw. 
Flexibility of mind is not easy, but it can mean the difference between
failure and success in trading.  Yesterday, it looked like buyers could
not keep hold of the rally, but like any other situation, confirmation is
required.  None followed.

 We have said this before, and it bears repeating: follow the market's
lead, do not get ahead of it like most trader's attempt to do, day in
and day out.  What we saw yesterday looked negative.  As you see
new market activity develop, it will either reinforce what you saw, or
negate what you saw and an adjustment is required, based on what
you now see.  New market information demands respect. 

 The negative sell-off on Tuesday had no staying power, and by the
close on Wednesday, price closed at the highest level for the year. 
It is apparent from the daily chart that with no downside, the market
consolidated; there was no real correction, and that should lead to
higher price levels.

1250, 1288 is a Point & Figure target, and then possibly 1300. 1250
seems a given, [although nothing can be taken for granted], and
1288 grows as a more reasonable probability.  P&F targets often mark
the end of a move, temporary or ending, so 1300 is less probable. 
But, that is the future, and until we "see" new developing market, we
will leave it at that.

 S&P D 8 Dec 10

 The intra day chart shows how the lack of downside follow-through
did not even reach support, and the low was slightly higher as a
swing low.  We use the term "glass ceiling" because it is an area of
resistance, but not an important one.  For as long as today's low
holds, higher prices are likely.

S&P 60m 8 Dec 10