How high is high for this market......

Here we are in wk 6 of new year.Every investor & trader is wondering what next.UP or DOWN.

Before we look @ possible scenario,let us first look @ my most reliable indicator for the market ( based on my experience) which is RSI,here is the reading as of Friday's close :

Dow 72.09

S&P 500 66.48

Nasdaq 62.32

As i have noted earlier that any divergence needs to be rectified.Nasdaq RSI is 10 points below Dow,which gives a clear signal that Nasdaq should move UP to catch Dow.

S&P 500 is also 6 points below Dow,which is also pointing to move UP to catch Dow.

Now the logical question is ,where will Dow go IF other indices are moving UP.

Dow has room for easy move to 80 area in RSI......

Whenever RSI gets near 80 area we have a "quick & sharp reversal of 3%"...which is a current trend.....can we move higher than 80 area..NO we have stayed in 80 area in recent past..but a quick & sharp reversal took place in Nov..where RSI went below 50 in a hurry & 5% correction took place....

So 80 RSI must be taken as point of correction to the tune of 3% to 5%.....

Now to the projected numbers....

Since we have just broken out to new highs in all indices after 3 week of consolidation,there is more new highs to come......

S&P 500 can easily move to 1370 area,which implies another 59.13 points or +4.5% from here...

So..it may be PRUDENT to maintain overweight in market.....

Market has given "clear signal" that we are going HIGHER....it ignored Egypt & lousy jobs data in the same week..when markets do not go down on NEGATIVE news..pay attention.....

Now the million $ question...where to invest or trade.......?

Thesis remains the same......stay with strong stocks......

How to find strong stocks ?

Watch the TAPE..it is as clear as a "crystal ball"

Do NOT try to be CONTRARIAN...let the market tell you where to TRADE...

For those who are investor or swing trader,it is extremely important to know the fundamentals of the company you invest or swing trade.Also important that you do not follow DAYTRADERS ie CNBC Fast Money who are in & out every 5 mt......

Let us take the example of FFIV,which i own & fond of for many months....it reported a below expectations in Sales on Jan 19th....it dropped $43 to $102.66 @ its low point..Joe Terranavo advised all his 5 mt follower NOT to touch FFIV @ all......guess what all his followers bailed out near $102 area.....Friday FFIV closed @ $123.64 UP almost $21 from low in 2 wk & 2 days......

So ..it is a classic case of knowing what an "over-reaction"looks like..a 1% miss in Sales guidance does not justify a haircut of 30%.......while EPS guidance was in-line.......

Weighting of my portfolio :

FFIV 28.45%
RVBD 21.70%
RIMM 21.37%
MGM 15.19%
BAC 13.29%

My portfolio YTD is down only 1.02%,thanks to FAST recovery in my portfolio & Canadian $.

Good luck with your OWN investment & trading strategy.

BLOG does NOT give buy or sell.

Saleem