As of this writing the S&P is up 1.38%, Dow at 1.5%, and Nasdaq up 2.01%.  Clearly the day is in the bulls favor with no signs of slowing down.  The markets have erased everything lost on Monday when the U.S. was downgraded.  On a trend day like this the markets will have a big up candle in the open and then slowly melt up the rest of the day.  The melt up makes it so the market doesn't chop but also means that if you didn't buy in yesterday you've missed the big run up.  The problem with missing the big run up is the urge to chase all of these high-flying stocks.  Days with big movement create big emotion which makes for bad trades - don't give yourself headaches by chasing.  On days like today we just enjoy sitting back and riding the wave higher.  Currently our portfolio is up 2% so we are content with letting it ride for the rest of the day especially since this is an established trend day.  The recommendation here for getting into new positions is to wait for tomorrow as this will give the market time to digest what happened today and make a more sound move going forward.

 

Here is a correlation we like to watch for market movement.  The $TNX (10-year bond interest rates) and the $SPX have a positive correlation.  The idea behind this is if money moves out of equities and into bonds, bond prices go up, and interest rates goes down. 

 

 

Here is $TNX on a 5min chart - the grey area is the overnight action which was used to establish support.  What we see here is the market opened, TNX went up, dipped, moved higher, dipped one more time, and then proceeded higher.  Besides the support levels developed also notice the development of a higher-high and higher-low which is a clear signal of an up trend.  Now lets take a look at the $SPX.

 

$SPX also shown on a 5 min chart.  I have underlined the dips to show that they correspond with the dips in $TNX.  Now the moves are not as big as in TNX but the direction themselves are quite similar.  Now obviously with every correlation it won't be perfect all time and divergence happens all the time, but being prepared with another tool at your disposal never hurt.

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