Last week (1,2) I talked about how the DJI should be breaking through the 12,700 barrier. We did not break through it, and I starting to become concerned. Some technical analysts will draw pretty pictures with lines in multiple directions, but we are hitting a resistance point. I like technical analysis, but use it in conjunction with mathematics and probability.

Here is what I would do, take some money off the table, not all. How much you want to take off the table depends on how nervous you might be. Last week I was so-so about locking into profits this week I am motivated to lock into profits. Then sit back and wait.

I see the market playing out in one of the following two scenarios:

  • The bulls have the upper hand and you should only put money back on the table when DJI breaks through 12,800 and not a point earlier. I am thinking if 12,700 is broken it might be a fake out before the bears take control. Right now the market is not convinced it wants to reach 12,800.
  • The bears have the upper hand, and you know the rule never catch a falling knife. I am thinking if the market falls wait until we reach 11,750 and then slowly think about putting money back on the table. My “beyond this is a major problem” support level for a bear run is about 11,250 to 11,500. I am doubtful it will break beyond this level, but you never know.

Let’s see what next week gives us…