Even though our technical and cycle studies of the broad stock market are pointing to a top now, there is a bullish energy ("irrational exuberance") that continues to push equities higher. We have now breached our stop loss points in both the S&P 500 and the DOW today so some traders may have already covered their short positions with a small loss. Those traders should remain on the sidelines and wait for a possible top to sell short in our next reversal zone coming up Aug. 12 - 19 (assuming the market doesn't turn down from here).
I did not post a trade alert today because this market is VERY ripe for a correction now. I guess my fear of being "whipsawed" out of my short trade overrode my stop loss caution. In favor of this decision is the fact that despite breaking above their recent highs, the DOW and S&P 500 are still below their February all-time highs as the NASDAQ continues to make new record highs. Thus we still have a very strong intermarket bearish divergence signal in place, and a sharp turn down is possible at any time. Honestly, the decision to stay short or cover short positions today was a coin toss - both positions are acceptable. If equities are strongly bullish tomorrow, I may bail out of my short position, but even if that happens, I will still be looking for another top in mid-August to sell short again (assuming the DOW and S&P 500 have not made new all-time highs). Holding my short position in the broad stock market for now.