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Dow 12,000 and the Eleventh Trading Commandment

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Do what you can to keep your attitude positive about the opportunities the market's new environment is going to offer.

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Watched pots DO boil. But then they're taken off the stove.

S&Ps exited the first hour back under prior highs, signaling the near-term top that I described in this morning's Buzz & Banter update. Dow 12,000 appears to have had ulterior motives, and its achievement wasn't quite the bullish indicator that our TV screens all but promised. As if the clock struck midnight and Cinderella's coach turned back into a pumpkin, or the full moon appeared and Bulls turned into bears [insert your favorite fable here]. The aspiration of reaching Dow 12,000 turns out to have been more motivating than actually reaching it.

What to do, what to do...

First, read Toddo's The Ten Trading Commandments. Its relevance to the days ahead can't be expressed enough. The recent three-day rally notwithstanding, this market has been in start-and-stop mode for some time, resolving each consolidation higher because that's how the last one resolved. Now the big attraction we've been driving towards is in our rear-view mirror. Today's failed new high is just a taste of things to come, with bigger swings of shorter duration.

Second, watch the economic reports. Not the actual data - unless you're into that sort of thing. If econ-minded Minyans pronounce the data as bullish, but the market reacts shall we say "poorly," then the fat lady is singing. We're well past the stage of actually wanting a "Wall of Worry," formed by pullbacks that trap shorts so their being forced to cover can spark the next rally leg. No, this stage of the rally depends upon good reactions to good news, and good reactions to bad news. The Wall of Worry has been scaled.

Third, clear your schedule. Or at least, be ready to clear it on a moment's notice. Those "bigger swings of shorter duration" will earn the full attention that you'll want to give them while they're happening. Whether a downleg gets underway, or one more pre-January Effect bounce adds to the froth, ranges are going to widen.

If there is an Eleventh Trading Commandment, it should be to reward yourself with more than profits - especially when there isn't one. The worst trading preparation is a bad attitude. If and when today's disappointment were to begin repeating itself, you'll be surrounded by more than enough bad attitudes. Do what you can to keep your attitude positive about the opportunities the market's new environment is going to offer.

No positions in stocks mentioned.
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