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Minyanville's T3 Daily Recap: What Dow 13,000 and S&P 1370 Mean for the Market


The market is giving traders time to be stock pickers.

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Back in October 2011, I stated that the Outside Reversal on October 4th could be the most important day of the year for the market. It turned out to be the bottom.

When the S&P (SPY) was 1200ish I stated my belief that we can see 1250-1300 by the end of 2011. We hit 1292.

During the last week of December, I was on Street Signs with Mandy Drury and Brian Sullivan. The S&P was at 1270, and I said it had a perfect technical bullish formation that could take it to 1320-1340 by the end of the first quarter. Well, turns out we are ahead of schedule.

Now the question everyone is asking me is: What does it mean if we hold above Dow 13,000 and S&P 1370?
It amounts to me as just another sign of growing confidence in what has been a great trending market. Taking out and closing above 1370 also takes the potential "double top" off the table. Some bears were trying to pound the table on this. Taking out and closing above 1370 could also keep the trend of higher lows and higher highs going back to the March 2009 low intact.

(Click to enlarge)

Strong stocks typically ride their 10-day or 20-day moving averages; it is rare to see the indices ride them so methodically. Since the December 20th Gap-and-Go, the Indices have been riding the 10-day moving average. The Nasdaq (^IXIC) has been over its 10-day moving average for 45 sessions. This should breed confidence! Instead everyone wants to call for a correction, because it has the potential to be the big, fast, sexy trade.
(Click to enlarge)

The market rotation has been impressive. Break outs are still taking place. The market is giving traders time to be stock pickers. I'm predominantly a short term trader because I don't like to hold stocks when they have violated their technical composure. But due to the way this uptrend has played out, I've been able to hold some positions for almost two months. It proves in today's markets you can invest and trade for cash flow.

Keep riding this trend until we see a decisive close below the 10-day moving average. Complexion and speed of the rally can change when that event happens. Holding multiple longs with hedges at key points has been the prudent and profitable strategy, and also using a tier system has helped to limit risk when the market feels like it has the potential to get downside follow-through. But we have responded resiliently at every sign of potential danger.

I do think we can see my original target of 1410-1440 for the year, and I might have to raise it. I also think we can see 1700 S&P by 2015. The next five years have the potential to be much better than the previous five.

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Scott Redler is long SPY, OIH, NUAN, IBM, GOOG, CSCO, JPM, GS, BAC, LVS. Short DIA, QQQ. Long AMZN puts.
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