Raise Stops and Set Targets – The Market Still Has A Little Gas In the Tank – Be Careful

Posted 10:00 AM ET - The market tested the low from last Friday this week and buyers scooped up stocks ahead of earnings season. The SPY rallied back above the 100-day moving average and "Fed Speak" fueled the move yesterday. My first target is SPY $186.50 and we should hit that today. Look for choppy, light volume price action with a positive bias today. The market is closed tomorrow and this rally should continue next week. We had an excellent exit for our short positions on Monday and once support was tested on Tuesday, we pivoted into long positions. This is still a low probability trading environment and you need to keep your size small. Raise your stops and set targets. I still believe the next big move is down. However, I don't want to be early. Five-year bull markets die hard. As the market continues to grind higher, I will be watching for selling pressure. Each time the market challenged the all-time high, Asset Managers sold into strength. If the market can't get back to SPY $189, a red flag will be raised. That would be a sign that sellers are aggressive and that the market is ready to roll over. Growth in China continues to slip and shadow banking credit concerns are escalating. Japan's growth is slow and they just raised sales taxes to 8% (40% hike). The ECB is considering negative interest rates and they fear disinflation. US economic conditions are sluggish and we have yet to see signs of pent-up demand. Corporate profits will be flat year-over-year and stocks are trading at a robust forward P/E of 16. The Fed continues to taper and interest rates would typically creep higher in this environment. To the surprise of many, bond yields have actually fallen and this indicates a flight to safety. Emerging market credit concerns (Brazil, Argentina and Turkey) can escalate at any moment. Tensions in the Ukraine are building with each passing day. There is an old adage that Wall Street climbs a wall of worry. That is not the case at this moment. We are close to an all-time high and all of these issues have been discounted. I believe the next big move is down and I don't want to miss it. Consequently, my call positions are on a very short leash. I'm ready to take profits at any moment so that I can focus on the prize. If you have a lot of risk exposure in your portfolio, I suggest selling some of your stock positions or buying some protective puts. This rally will be your last chance to do so. I believe the correction could start as early as April and we should see if 15% decline (or more). The depth will depend on global economic conditions. Raise your stops and set targets. We should see an upward bias today and there is still a little gas left in the tank for next week. Happy Easter – Happy Passover! . .

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