The Rubber Band Is Stretched

Remember when Homeland Security would raise their alerts from "guarded" to "elevated?" That's a fitting analogy to what I'm seeing in the market, and it's the reason I've been putting out alerts that suggest we need to protect profits on any current long positions. I even put together a video illustrating, over the years, how many S&P 500 moves have terminated temporarily at extensions of prior swings.

What really gets me watching an index (or stock) for possible failure is when the price meets the minimum target for most of my trade setups -- that is, the 1.272 extension of the swing into the setup zone. An example of this is when the S&P 500 hit a low on June 4 of last year, finally reaching the 1.272 extension at 1464.71. When this happened, I had to consider that the S&P was vulnerable to a healthy downside correction....462 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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