Blow off top or first leg of new bull cycle?

As always I spent some time looking at charts again. Additionally I went through my normal blogs I frequent and was very surprised what I found on many of them - bulls all over. Everyone is calling for this move to enter a short retracement to continue higher. From one perspective I can understand where this is coming from, we have broken one of the trendlines I had outlined a few weeks ago and it seems we are in the process of breaking out of a bullish lowering wedge (9+ month time frame). You can find charts left and right at this point to validate any type of mid or long term pattern, bullish or bearish.

So what do you do? How can you make sense if all this and where will it lead. Lets assume for a moment that we are not going to make a new low below the 666 range on the mid term. We will retrace slightly and rally towards the 200dma, by the time the retracement is done and the rally continues that average should be below our 945 range (my 912 target I had referred to a few times). However, for this to happen, the past 3 weeks should have played out very different. Forget about patterns for a second and get back to basics. Look at the trade range we have experienced, low volume, huge GAPs, choppy behavior and a total lack of momentum. I keep on hearing people saying "do not stand in front of this bus" - what bus are you seeing? you mean this guy on the bicycle? Thats all I am seeing, there is no buss, not even a fiat pinto. I gladly stand in front of that knowing it will crash into the wall.

Now on the flip side, something happened on Friday that has me a bit concerned on the bearish side. GE reported good results, yes they were good results, this is not one of my sarcastic comments I make, I was very surprised at this. Many have always said GE is a measure of the overall economy due to their exposure to all industries. Earnings of GE have led the direction of the market in the past and this time around, we have to take this into account.

As a result of the GE results, I will approach my current shorts with a bit more care until we break 724 on the downside. Meaning I will take some off the table at important support points and place the stops closer then I normally would (~2 day closes). Once we get below the 724 range we are good for a new low but anything above needs to be traded with care.

Today
We have had 5 up weeks in a row, showing a great amount of strength in terms of price however volume has dropped significantly, something we need to take into account. Is it possible to make another high this week? quite frankly it is, but only a low chance.

Futures wise we are already a bit lower here, so there are 2 easy signs to look for. the 856-858 range here, an open below 853-854 will lead to more sell offs today, an open at 860 will most likely allow the market to maintain the current narrowing up trend to re-attempt the upper ranges.

If we are to get an open below the 854 and will get some sell off, we need to be watching volume very carefully as it will give us great signs. We will have many long stops to worry about on the way down, other retail investor longs that have been told over and over a retracement is coming, those will sell at the first sign of drops, and of course new shorts with many bears averaging down on their current short exposure or bears that were on the sidelines entering after a confirmation has been in place.

Good luck all !!!