Charts give us the opportunity to wait for confirmation or enter ahead of time – to anticipate.  And while the latter may give us more of a feeling of being right, it’s not an easy way to trade.

Here’s an example from this week…

Today we will find out if the market is forming a top or if it is ready to break out. There was one major development overnight that could push us through resistance at SPY 130. This morning, Fitch said that it will not downgrade France in 2012. The market had already priced in a one notch downgrade and this news came as a relief. Standard & Poor's might still downgrade France, but it is unlikely to reduce its credit rating by two notches.

I went long GS on the breakout of the moving average. Notice the bottoming "W" pattern and the positive volume that has has developed within the pattern. My stop is just under the moving average at around $97-98. The targets are around $110 and $115. Entry was at $99.88. This gives me a phenomenal 5:1 reward to risk ratio.

Last week, the market ran up to resistance on the first trading day of the year and it stalled. An excellent round of economic releases was not enough to force a breakout. Asset Managers are cautious and they are not chasing the market higher. Today, earnings season will kick off. Alcoa will announce after the close and I am expecting poor guidance. Half of their revenues are generated overseas and they will point to weakness in China. This has been one of the busiest preannouncement periods in years. S&P 500 growth forecasts have been cut in half for Q4.

The gold market rallied sharply today closing above the recent trading range. The ETF GLD which tracks gold showed a nice increase in volume confirming the breakout. You'll notice that the recent consolidation developed right at key support (green line)  which tells me that the bulls are once again in control of this market.
If you look at the commitment of traders data (not shown) you will see