Today’s market consolidation was a certainly nice to see. The normal day would appear, now to be 1% or moves to the upside or down. However, today bucked that mold and put in a decent day for the bulls consolidating recent gains made after Wednesday’s massive move to the upside. A question pops up and that is whether or not Wednesday’s move was simply short covering or real buying. Perhaps the better question is whether or not it matters!?
Trend following certainly doesn’t care whether or not it is real buying or short covering or even if aliens from Area 51 are buying/selling the market. It simply doesn’t matter. Quite simply put trend following simply means getting aboard the trend in systematic fashion. Do you know if this rally is for real? Does anyone? No, but it won’t keep the market pundits from trying. Sure we can opine our feelings regarding the current situation, but in the end price and volume are the only two things that matter to us.
Tomorrow’s job report will certainly be a catalyst for market pundits. Market reaction is always what we care about. Day 5 of the current attempted rally is tomorrow and if we can confirm a new market rally it would be a strong signal (especially if volume is above average) we have a brand new trend back in town! Given the negativity about Europe, rightfully so might just be that wall of worry this market needs to move higher. Let’s be patient and let the market come to us and then let us act within our rules. Stick with disciplined trading!
Rule #1 Cut your losses!
