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12/2 Trend Day

Typically you don't see two back to back trend days in this market.  But we are very close to the highs in the S&P and they are making a run for it. Combine that with the fact that December is a bullish month and there you have it.  The advance/decline remained steadily in favor of the bulls all day.  There was a steep sell off after today economic release at 830; around 8pts.  This was quickly bought with no retest of lows.  Then we had a grind up the continued for the balance of the day.   After hours the market came within a point of testing the recent highs.   Lesson learned today.... This is very strong tape, don't fight it and favor long trades.  The selloffs are temporary pullbacks in a longer term uptrend.  I know this sounds obvious, but in trading you need to reinforce the longer-term trend so you don't get caught up trading on the wrong side.

With that said on down trend days I look for confirmation, check the signals and place trades on pullbacks in the direction of the downtrend.  But in todays example the quick sell off was a reaction to news and not an indication of the intention of the market.  Some would call it a head fake. Whatever the case it's best to stay away from news 10 minutes prior and 15-30 after due to these quick moves.  I sometimes take trades here but I utilize tight stops.  Especially in premarket news releases there is a thin market and it doesn't take much to move it and it doesn't tend to respect S/R numbers as much.  Today I was looking  at the 1204 level which is about where we closed yesterday as a decent support to trade off of.  Becuse this was a news release I gave it some breathing room, but had a 3 point stop in place.  The market traded close to 1201 then took off.   In Regular day session a sell off of this magnitude would typically rest and continue down.  In this case because it was a reaction to news and I knew 1204 was a good support I found it to be a good risk/reward.   Happy Trading!