Giving in to the markets

Yesterday
While this week is quite difficult for me to focus on the market, yesterday was important enough for me to convince me otherwise. I had posted a special update at the end of yesterday - days like this do not come very often and give us amazing chances. We had a down day yesterday but nevertheless it was quite bullish. We were able to maintain a new uptrend off the lows that should give us a nice direction for the next few days.

Today
Looking at premarket data we can already see that we have tested the highs of yesterday. We should continue on testing the upper ranges with a potential of breaking the high of yesterday right in the morning or attempting to trade towards this range as an ascending triangle with a break towards mid day around 11:45-12:15. Yesterdays close should provide support on retracements from the upper ranges. The bulls had 2 great days here stepping in with volume and committment.

Its the third day of this new trend and we need to watch weakness set in here or strength to continue. Seeing the last 2 days it is my feel that we will reattempt the 800 range before we see new lows. The following question remains - are we going to break the 800, you remember I had stressed over and over again that once we break below the 800 we should NOT break it again on the upside. This will be a great test for the market to determine the strength of the double bottom here. It is definitly looking like we have a chance here. One of the things we can say with confidence here is that we know what will occur and we know how the market should behave and trade to give us signs of the next move to come. After all, this could be a simple retracement after we had dropped significantly off the January highs - the 23% retracement is right at our door step at 787, with the 38% at 817 which falls perfectly inline with the 800/820 range that has been so important for us.

How to trade this?
We know our trend now so we can take long positions with a bit more confidence, on the short side we can use our yesterdays top and of course the 787 as great entries for short retracements down. Yesterdays close should provide great support with very good protection, long off the 763-765 range with stop loss of 760.