Why S&P 500 is making higher lows ????

If you look @ S&P 500 chart since March 2010 an interesting picture is developing.....

-First we hit 1219.80 in 2nd week in April....then flash crash LOW of 1065.79 in 1st week May

-Then we went UP to 1173.67 in 2nd week of May....then went DOWN to 1040.78 in 3rd week of May...

-Then went UP to 1105.67 in 1st week of June....then went DOWN to 1142.17 in 2nd week of June

-Then we went UP to 1131.23 in 3rd week of June....then Down again to 1010.91 in 1st week of July

-Then we went UP to 1099.46 in 2nd week of July....then Down again to 1056.88 in 3rd week of July

-Then we went UP to 1120.95 in 4th week of July....then Down again to 1088.01 by Friday the 30th of July......

IF...we look @ the chart it becomes clear that there was a well defined "downtrend" since 2nd week of April HIGH of 1219.80 which culminated @ 1010.91 in 1st week of July.....this downtrend lasted 14 weeks......We lost 208.89 points or 17.12%...a very steep decline....

Since 1st week of July Low of 1010.91...we have made "higher lows" of 1056.88 & 1088.01.....this "ascending" higher lows in last 4 weeks is extremely encouraging......

Last Friday...as you all recall...I was NOT sure about the near term direction of market.....So...I sold 60% of my position by locking profit in all my trades & had VXX in my portfolio.....

Logic for that "anticipatory" move was that we have come a long way to 1102.66 from 1010 low only 3 weeks ago ...a hefty gain of 92 S&P points or 9.1% gain in 3 short weeks.......

It is important @ certain stage of market to lock all the gains when we are getting "frothy".....as we can lose all the profit in a hurry IF market turns.......which it does repeatedly..as illustrated in the above example....

Too many traders are fixated on "euphoria" instead of locking gains......

Markets go UP & markets go DOWN.........IF you are constantly riding it UP & DOWN & not locking profit......then you are not getting ahead... a lesson I have learned "repeatedly"....

SO.....the bottom line is ....purpose of being in the market is to make money...you do not have profit unless you sell....

Now that we have found another support around 1088 area....there is a very good chance that S&P 500 will go higher than recent high of 1131.23 in 3rd week of June......

The question IS...how high can we go in S&P 500.......????

Based on the quality of earnings & guidance given by strong companies...it MAY not be far fetched to expect 1160 to 1170 in S&P 500 in this run......this scenario has a potential of +69 points or +6.27%...pretty good in short term.....

It is important to buy stocks which are strong in their sector based on recent TAPE action....bargains/weaker stocks must be avoided......being diversified in strong sectors is highly prudent......

Yes.....markets remains choppy BUT trend is UP.

Currently I am 90% invested & may add more on Monday.

My portfolio is BIDU,BCSI,EGO,LRCX,SOLF......

Good luck in your OWN due diligence & comfort level.

BLOG does NOT give buy or sell.

Saleem