Rally Unexpected

I did not expect the market to rally straight out of the bolt today. After the down day on Tuesday, I expected the S&P to dip down to fill the gap just below the 1200 level. However, that was not how things panned out.

The S&P is now backing off a little bit after hitting (stiff) intraday resistance.

Don't Press It Too Far

There was some profit taking into the close, just as I had anticipated. This is to be expected after back-to-back rally days into stiff overhead resistance as well as impending uncertainity concerning tomorrow's FOMC meeting.

The pattern of having a gap up at the open, a morning rally, a lunch time or early afternoon flatlining followed by a rally into the close usually works best for the very first day it occurs. On the second day, short-sellers have been washed out and traders who took the correct side are more eager to protect profits. Hence on such days, long positions should be taken off at least 45 minutes before the close.

The futures are well off their intradays highs now after the closing bell, especially the RUT.

The market performed test of the lows that played out to absolute perfection. Immediately after a Friday morning dip to test Thursday's lows, the market commenced a big rally that has lasted until today, Monday afternoon.

Both Friday and today were powerful rally days that took out a number of resistance levels. However we are now at pivotal resistance --- take for instance 1210 on the S&P 500 index as well as its overhead 50-day moving average.

The fact that we are now well off the lows as well as the fact that there is a Fed decision tomorrow and key technical resistance overhead keeps me once again on the sidelines after I've managed to scalp a small quantity of intraday profits.