Ebulliently Extended

Mentioned the 1531 Fibonacci target yesterday and was pleased to see the market close at 1530.94. It's backing off in the pre-market session too. Do I think it was the top? Not likely. But these are areas to keep in mind for profit taking and hedging, and that's what I did yesterday.

I have some SPY 152 calls that have ramped up in premium, and hedged them by adding some VIX calls early and some SPY 152 puts later. As there is more time value on the SPY calls, I'm using less time with the puts by using a closer expiration for less money.

At this point, the S&P has made enough progress so that a re-test of the 1475-1500 area would not endanger the uptrend, yet would release the tension, so to speak.

Asia had a nice follow through on yesterday's strength, but today Europe is mixed. Perhaps that is what is creeping into our markets today, along with a sense that they're ebulliently extended.

The other side would suggest that being so close to all-time highs, the market could stampede in a straight-line bull run right past 1576.05. I'm trying to be ready for either scenario.

One thing that was interesting to me was the end-of-day TICK action. Per my Tradestation data, it showed the market closed on the highest ticks since the January 2nd breakout. Evidently, everyone had to have 'em at the close because it was a sure bet that the market would be up today. Yet A/Ds tell a different story: since the January 2nd breakout, there have been consistently fewer advancers and more decliners as the market has gone higher.

It's one thing for the market to act irrational. But I try not to get swept along, whether through greed or fear. Both are detrimental to success.