Trading activity will be soft but next few days. The market has nice upward momentum, but I do not believe it will be able to break out to a new high this week. There are a number of issues that will keep resistance intact. The radiation leak in Japan is worse than expected and material is leaking through a cement crack in one of the reactors. It could take months to stabilize the facility. The country will have to make massive budget cuts so that it can reallocate money to the $300 billion reconstruction effort.

I just wanted to post the numbers for the indicator tonight. One quick note -  USO and GLD have RSI (2) readings that have reached historical extremes.
Also, another successful trade today in the High-Probability, Mean-Reversion strategy. The strategy is up 23.7% since it was initiated in November 2010. Check it out here. Remember, patience pays. [...]

This has the makings of a very quiet week. Earnings season is winding down and the economic releases are light. Stocks have good momentum, but the market is bumping up against major resistance. Greece has not reached an agreement with private investors and that is weighing on the market. Unions across the country are striking and that is making investors nervous. Greek officials are trying to draft austerity measures that would lay off 15,000 public sector workers by the end of 2012. The minimum wage would be cut by 20% and they are also trying to reduce pension benefits by 20%.

I came across a great article on the one bad trade syndrome. Several months ago, Slopers (Tim Knight’s Band of Followers), were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make [...]

The market is basically flat for the week. On Wednesday stocks rallied to a new relative high after the Fed said that it would maintain its zero rate policy for the next two years. Those gains evaporated yesterday and earnings have not been able to push the market higher. Next week, Asian markets will reopen and trading will be back to normal. Central banks around the globe are expanding their balance sheets (printing money). They have granted the ECB unlimited access in an "all in" strategy. If Europe fails, we all fail. This strategy has temporarily eased European credit concerns.

The markets will be pretty quiet this week as many traders extend their holiday. Stocks jumped last week when we learned that European banks borrowed €498 billion from the ECB. They used the proceeds to pay down more expensive debt, fortify balance sheets and to purchase short-term sovereign debt. This temporarily soothed nerves. The ECB's balance sheet has grown to a level not seen since the peak of the financial crisis in 2008. Most analysts see this as the "bazooka" they were looking for to stabilize financial conditions.

I've been looking for market bounce and this week we got one. Worst case scenarios were priced in and the news was better than expected. Greece passed the first of two austerity votes yesterday and the Prime Minister believes he has enough support to win the second vote today. This outcome will show commitment and it will pave the way for ECB/IMF funding in the next two weeks. Spain and Italy are of greater concern in the long run. Both countries are considerably larger and the bailout amounts would severely stress the European Union.

Yesterday, the market took a breather after a huge run-up on Tuesday. Traders evaluated the" Group of Six" proposal and weighed the political reaction. The consensus is that the debt ceiling will get raised and default will be avoided. Republicans rule the House and Democrats control the Senate. The "Group of Six" proposal would probably get through the Senate, but Republicans still don't like the tax increases and they want bigger cuts. Even if proposal gets through Congress, it will take weeks to translate the specifics into legislation.

I mentioned yesterday that I was surprised by the market’s reaction to negative news events on Wednesday. After a massive rally last week, profit takers should have been anxious to lock in gains and they had every reason to earlier in the week. Wednesday, China raised interest rates. Given the economic slowdown and Premier Wen's claim of victory over inflation, analysts were expecting a pause before the next round of tightening. China has aggressively increased bank reserve requirements and hiked interest rates six times this year.

Yesterday, stocks retreated when a debt ceiling agreement had not been reached over the weekend. The President and the Speaker of the House addressed the public last night and the comments were adversarial. Surprisingly, the market is not selling off before the open. Republicans and Democrats have drafted their own plans and the House will vote on Wednesday. Given the market's reaction, traders believe that the debt ceiling will get raised. It is unlikely that long-term structural issues will be part of the deal and our credit rating could be downgraded.