Market Timing Signal: Remove Short Hedges

The following was sent to those on my free newsletter after the close on Thursday. If you would like to receive this in a timely manner you can sign up on the right or go to zentrader.net

I really needed to see today's close as we're at extreme levels where if the market reversed off the highs a few hours before the close it may have been enough to keep the timing signal in the red. As it stands the markets finished strong and it's time to remove any short hedges you may have still had. I just covered my shorts on the QQQ's a few minutes ago and I didn't really get hurt too bad because I'm long TBT and a few select long stocks from my long watchlist.

With all of my charts green lit now is the time to start building your watchlist to buy on any pullbacks. I'm not issuing a green light because I want the market to pull back a little and then I'll send out an all clear sign. I believe we have a big economic data release tomorrow so it will be important to watch how stocks react to that.

Volume exploded to the upside on the Nasdaq and broke out to new highs where the Dow really just got back to previous resistance. That is going to be key to watch to see if the Nasdaq raises the Dow up or if the Dow drags the Nasdaq down.

Notice how the volume went above the upper bollinger band (have you ever thought of adding a bollinger band to volume?). Normally this is a day that marks a short term top/bottom or a continuation of the trend. In this case I believe it to be a continuation, but let's see how the market reacts tomorrow. If it's more upside then we may have to chase stocks a little, but it'll be much safer in my opinion and a sign that we are going much higher on the markets.

This chart worries me.