Disbelief in this rally is running rampant. That disbelief, however, does not preclude the market from putting in days like today.
We took off our leverage for the first time in quite awhile on the open, suspecting that this week would be a volatile one in both directions. That volatility gives rise to opportunity, which is why a cash position was necessary to capitalize on the events to come.
The buy zone (highlighted in yellow below) should arrive by Wednesday, if the market decides to be so gracious as to afford investors the opportunity for another dip before heading up to 4200 on the S&P and 13000 on the NDX.
Far too many traders are looking for a retest of the now infamous downtrend line from the 2022 highs. This makes the signal far less relevant than it would be otherwise. In fact, if the NDX does test 11450 this week then the bulls have a real problem on their hands going forward. I'll detail this further if it does occur, but for the time being it doesn't necessarily warrant discussion as it's a low probability scenario this week.
At maximum, the downside from today is to the 11550-11750 level. This is your buy zone for the week.
The more shallow the pullback from these levels, the higher the probability of catapult type action back up to 13000 within the next two weeks. A move to 11750, followed by a quick rebound back above 12000 would be ideal for the 13000 scenario to come to fruition into the middle of February.
Watch your levels.
More importantly, watch how the market treats these levels over the next few days as a signal for just how great the momentum on the upside will be in the days and weeks ahead.
Goodnight.
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