03.24.09 Yuck

Not the market, but me. I way overtraded, broke all my rules, and paid for it dearly today. I have no idea what came over me. At the same time, I did receive The Daily Trading Coach by Dr. S today. I have read a couple of the 101 lessons, and I must say it is a good book. A good trading book is hard to come by these days.

Some thoughts re:the market in general.

1. The market did hold on to its gains from yesterday's enormous rally.
2. The dark cloud cover candle pattern three days ago was demolished by yesterday's candle, and today's candle did not even retrace half of yesterday.
3. The RSI is getting to the upper end of the bearish range and may need to consolidate lower. A move down to the 40s would be good.
4. Pretty good negative divergence on the Composite Index, a momentum gauge based on the RSI that tends not to lie with negative divergences (but there is no holy grail!)
5. At the same time, there is a good inverted head and shoulders on the S&P daily starting back from mid-February.
6. The 50 MA is waiting on a retest

Thus, I think it is reasonable to expect, especially with today's close, that the market will retrace a bit more tomorrow.

That said, it is important to consider all situations. A nice pullback to 790 - 800 is most likely. From there it will be important to watch market reaction. This would be a welcome opportunity for longs.

Alternatively, the market could gap higher and surprise everyone to continue upward to the 830 - 840 area. Quite frankly, I expected that today mid-day before things rolled over. In this situation, I will not chase it.

Lastly, and what I expect, is that the market may open slightly lower, rally back up (but not to today's highs), and then roll over to go to support. An ABC correction is a normal pattern especially for a structure that appears to have five waves to it (shock and horror yes I mentioned EWT!!! :)).

Best of luck tomorrow... hope your trading day was much better than the crap I managed to spew out today. I've been at this for over a year but sometimes my discipline seems to dry up. Today was unfortunately one of those days.