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Well, obviously no one knows, but when we consider the future direction by way of probabilities, I would argue the path of least resistance in the near term is higher - albeit with volatility so low, it will likely be a grind higher than something more explosive.
From a pure fundamental standpoint, the level for me to really look at short positions with higher conviction is 5700 – if the US500 can get there, without broad earnings upgrades, then this is where things get really stretched and the low tolerance for any negative news will resonate with increased daily selloffs.
The playbook
Technically, a convincing closing break above 20,080 for the NAS100 and 5520 in the US500 would get the party started again and squeeze further juice out of this bull market. Buying into strength may seem a bizarre concept to some, but not to those who subscribe to the theory that a body in motion, stays in motion.
Should the price roll over, however, and head through 5445, I would strongly reassess that bullish stance, especially if the VIX index were to rise above 14%.
Running a systematic stop, such as a simple 3-EMA and 8-EMA crossover would work too - so if the index does kick higher, then I would stay long and unemotional until these rules dictated an exit. Simple trading, but it works well in trending conditions.
The bull case
The risks to consider:
We can go on with many more considerations and variables to add to both the bullish and bearish arguments – however, as always, sentiment and flow are what move price in the short term, and often the market will simply go to where it wants to go.
Be a slave to price action and consider the probabilities for future direction. This week’s US payrolls may be a risk, just as it might be a positive catalyst – but I have a playbook and quasi-plan of attack and remain vigilant to effectively manage risk.
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