For those in either the MAKO or NM long trades, be aware that they are both rapidly approaching their first target levels with NM up about 11.6% & MAKO up about 12.7% from entry.  I am aware that I’ve been overly cautious on the long-side lately (too bearish) but the fact that the market continues crawl higher while ignoring numerous red flags and recently triggered longer-term sell signals (that can take weeks to begin to play out) does not make me any less cautious.  Putting aside all the bullish cheerleading recently as the DOW (the single most insignificant and least representative yet most widely followed of all indices, at least by the mainstream media) has made new highs, I continue to believe that the R/R for being positioned heavily long or un-hedged at this time is very poor.  That does not mean that the market can’t or won’t continue to move higher…it just means that the “amount” of reward for the “risk” you are taking to achieve it is not favorable.  The best way to explain this is that I would put the odds at very good that within the next few weeks, quite likely by the end of next week, the market drops sharply enough to wipe out the last several weeks or more of gains in just days, quite possibly even most of 2013’s gains in just weeks.  My next pullback target is 1475 on the $SPX, which would take us back to just above the Jan 10th highs and it would not surprise me to see that level hit by the end of this month.

I know bearish prognostications are being ridiculed lately and that’s fine.  I’m not advising anyone to short the market with both fists (nor do I ever give advice, just my opinion on things). I just wanted to share that my current plan is to book partial and possibly full profits on my positions in MAKO and NM if they hit T1 (and possibly sooner if I see something in the market that convinces me to exit before then).  Trading is all about positioning to maximize the differential between the amount of risk (potential loss) that you take to achieve an expected reward (potential gains).  If you find yourself buying when it feels comfortable to buy & it looks like the market will go up for ever and selling your positions for a loss just when things couldn’t seem to look worse, you are repeating the cycle that is common amongst the retail investor/trader (buying high and selling low).  Right now, being long just seems too easy and I plan to update some of the warning signs as to why caution should be exercised on the long side at this point.