Limited Upside

First, a couple of comments: 1) the advance GDP report comes out Friday, not tomorrow, and 2) I missed the news on the "Bad Bank" plan until this morning. I was out running my wife around on some errands. Currently, she can't drive much since she is suffering from severe neck pain due to a car accident and is waiting on approval for surgery. All of us will encounter stress in our lives and it can, most likely, will affect our trading. I have had my share of stress over the last few years, and I can tell you that having a sound trading plan helps me keep from making stupid mistakes, although I certainly make mistakes from time to time.

I do not trade off of news events, except when such news events are concurrent with and supportive of a valid system trading signal. The news from last night and today really does not clarify anything with respect to the trend, but it does fit the profile for an E wave, or perhaps a 2nd wave. At this point the market is behaving as expected. The Qs should not push much above 30.84 to 31.00. The move following that level should be a hard selloff that quickly retraces back to the 1/20 low or we will have to reconsider the current viewpoint.

IBD has scored this as follow-through day, but I would still remain cautious. So far, markets are following the script of the post-election year cycle as can be seen on http://www.seasonalcharts.com/. The typical pattern shows an initial upmove in January followed by a low in the 3rd week and another strong advance to finish the month. However, February is hard down. Whether or not, the Qs make a minor new high, a selloff is the expected outcome at this point. Last year the election year cycle inverted which gave excellent guidance for the hard down move in the fall, although it was a little early. Now, the cycle has inverted back to its typical pattern, and regardless or whether we see new lows are not, February is expected to be down, so I would not get too caught up in the current bullishness without a pullback and confirming breakout.

I keep wondering what creative new scheme our government will come up with next. I wish I could move my mortgage under an unrelated entity. The improvement in net worth would be nice. Really, this stuff is not that complex. The fact is that if it won't work for an individual or small business, then it probably won't work. This is all just smoke and mirrors. If our government used basic personal finance, we would not be in this mess.