The first week of 2010 brougth the breakouts to the upside in many important indexes and commodities. From what we follow here copper extended its previous break:



... and crude oil finally broke through the line it unsuccessfully approached so many times in the past:



These are clear breakouts that need to be respected. Barring a fake breakout which on such scale is hardly conceivable, they most probably show the direction of the markets for the coming months irrespective of the fact what majority of us think about the origin of the current rise.

Love that DIA chart...

I made a post worth looking at in the 'Jim's Thoughts' topic.

My next area to watch, if this current area is overcome, is around 52-53.50. If it takes some time it may be a bit higher, since the key line is sloping upward and going higher as time passes. This is just a brief overview, as I have layers and many lines to consider.

We have now third attempt to break out from the downsloping set:



If successfull - the way to new highs will be open.

So far looks like a fake breakout right to 0.886 to the tick. It's not that easy to set new highs anymore. The current one is the oldest this year - it already has more than 3 days ...

Nice burst here. Let's see if it's got the juice to start the next leg up.

A point and change to the new 'bull market' high.

3/4 of a point. Darn. Almost hit that new 'bull market' high. Still, considering the setups were all over the 12th and 13th lows, I think it was a pretty quick march right back up to the highs. I can live with how much it has done off that last setup, if this was it. But, I'll let price action tell me that, and not what I think or what I'd prefer. The trend is still manifestly up on the daily timeframe. Let's see if tomorrow brings that new high, or if earnings give the excuse to correct this some more. Either way, I'm just on the hunt for setups. It's all about the setups.

I will say that based on a lot of cycle work I agree with what I am seeing from others that Friday or Monday is a time cycle for a significant high/top to be put in. (It's also the dark of the moon, common for tops.) Based on what jarek was showing, this thing needs to top in here very soon. Roofer has also been talking about a significant turn in here. As I posted in Jim's Thoughts, bears are at an extreme low, superceded in recent times only by the time in '87 before the crash. Everything is in place. The only thing that has to happen for this to play out is the market has to show up to the party. We'll see. I'm ready, but I'll believe it when I see it.

The last post by jarek is especially useful for us here. It is a great 'context' example. That's a primo choice, great looking setup, with many of the factors I look for. But, this is coming off a large flat ABCD which is not only a much bigger pattern, but is also in line with the main trend, which is up. So, would I play a small short setup in here, set up to fade the bigger pattern? Only if I thought the larger setup was likely to fail. I don't feel that here. It may fail, but I surely don't want to fade it. In fact, the long side has been triggered already.

So, how do I read this, what's my play, so to speak? As I mentioned, this triggered beautifully with multiple setups on the way down, as already discussed. It went right to the key area I was watching, and started up. The short side is closed, and the long side triggered. May this roll down to a DT ABCD area, or even be a major top? Sure. But the last eighteen or whatever times it did something like this, and the top callers said the top was in, it went right back to another new high. I want to play that until it breaks.

This means I want to be proven wrong. That means I am playing with the trend until it breaks. There will be plenty of time to play the short side once a top is in. As I discussed and explained several times, this does not mean I never trade the short side, as I felt the last two drops were get setups and plays. It just means when it goes to a likely support area and reacts I'm done with the short side, and back to the long side. I will repeat this until I miss the top. When I close my long side out and it drops down further and all the top callers are laughing at me I'll be smiling. I stayed with my 'Trading Plan'. Then I can start looking on the short side at resistance, and countertrend only back to resistance.

You see, at some point a top will form, and I'll 'miss it'. That's by design. That's what I am trying to do. To look at the one time when a top caller catches the top, and then say the plan should be changed based on that success makes no sense to me. Even a stopped clock is right twice a day. One must account for all the failed attempts and missed trades on the way to catching that turn right at it's inception. It may be a nice trade there, but overall I find it a lot less procuctive than the approach I have been describing.

I say all this not because I am upset with anyone, or anything like that. My 'job' in here is to help people understand the KT methodology. That's all I'm trying to do, explain the philosophy. Make it clear what my approach is. Everyone can trade however they want, but if someone is in here, I assume it is to try to understand more about this methodology. If I see some key concepts aren't being grasped, I will try over and over to make those concepts more clear. That's all I am pointing out here.

The bottom line is, I am not going to trade this little bearish ABCD, I'm already triggered on the long side. If it rolls down on Sunday night, that's fine. At some point this will correct further. If I'm long, I'll be stopped out. The top callers will win this battle, but I think the war will be lost with that approach. I hope this one rolls down. I hope they crush this market, unmercifully. But until they do, I'm going to stay with the trend until proven otherwise, or until I get a big bearish ABCD setup. Along the way there will be areas worth taking shots at, followed down until a reaction happens at support, then it's back to the trend.

And after the fact, if this bearish ABCD here plays out fantastically, would my opinion change? Not at all. One case doesn't matter, only the aggregate. One of these bearish patterns will follow through, but the point is follow the odds, not the one case. And that all depends on the 'context'. If I thought an intermediate top was in, I'd already be short and holding here. If I thought the 'context' favored the resumption of the uptrend off this big pattern, I'd be long. But to start a new short this far down on that small of a bounce, right on support, that doesn't make sense for me, 'context'-wise. Make sense, I hope?