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Start of the Next Great Rally?


Maybe - but don't get caught up in the hype.


One of the hardest things to do as a trader is to sit idle and remain patient while others are high-fiving and enjoying a run. I can't recall a time when we started the year off with such a bang, and coming in with little to no exposure to the long side -- and just a few shorts -- hasn't been easy. But I'm taking refuge in the fact that the 2009 ballgame is far from over; in fact, it's only just begun.

If this is the start of the next great run, I'll have plenty of time to play it as I quantify my risk/reward ratio and step in with a clear plan. As I watch the final hours unfold, I'm getting the sense that managers are already stumbling over themselves to get into the market, so as to not get left behind.

The S&P, NASDAQ, and Russell 2000 are all breaking trend-lines and saying goodbye to their 50-day moving averages - all very positive technical moves. Volume is light, which is to be expected, and the jury is still out as to whether or not the move is real.

The best play at this time is to remain patient. If you enter a long, do so with a plan, and not because you feel like you're being left behind. If you enter a short, follow the same strategy - but don't enter because you're convinced this move is phony, and think you're smarter than the tape.

As we head into the final bell, I'm looking at 2 ETFs that I'll start, should we continue to go out at highs. The iShares Mexico Index (EWW) is breaking a recent pennant and looks to offer decent risk/reward with a stop at the 50-day, as does the Semiconductor Holders (SMH), which is breaking a trend going back a few months on a pickup in volume. My stop here would also be the 50-day.

Take a deep breath, Minyans - and don't get caught up in the hype. This is just Day 1, and we've got a long journey ahead.
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