We have been buying support aggressively (day-trade mostly but also some swing) in the last little while and thus far it has worked like magic. as almost every support spot we have listed from the night before found buyers. This is for us the most important thing to watch for going forward -- are support buyers going to still step in as they have in the last few months?
To us this is even a better gauge of bullishness than break-out continuation. Break-outs often fail in bull markets when traders get antsy or think market has gone up too much, too fast. But major support not holding is a much more accurate sign of a change in sentiment.
We have dozens of support spots going into this week -- as soon as these stop working we will back off completely. But until then we will enjoy it for as long as it lasts: buying support with a 15-20 cent stop and easily making a point on good size (on $30-$40 stock, add a zero for GOOG type prices). It's quite possible that we've made more in the last 4 weeks than we will in the next 2 months -- we're prepared for that and know that you have to respect the market's moods. When it's this easy we will keep hitting it hard but when the strategy suddenly ceases to work then we will immediately step-back and re-assess.
This week in some ways for us will be pivotal as we are close to many important support spots. We'll be watching like hawks to see if support on our alerts hold or whether some real signs of weakness creep back into the market.