Return to Normal?

technically speaking, there’s no way to not say that friday’s breakout and close above 1230 was not bullish.  nor, can one make a very credible case that the next key resistance area is NOT the 1260-1270 area (my alternative scenario of 1265 from a week ago).  that looks pretty clear on the charts.  however, i still believe the risk to being fully long (most/all trading cash in longs without any hedges/shorts) is very high due to where we most likely are in the early stages of the bear market that most likely started on May 2, 2001 (highs for both the SPX, Nasdaq comp and most other primary indices).

here’s that “stages of a bear market” chart that i posted on 10/19 and a the first page of bloomberg news article that i was looking at today…. the hight-lighted points sure sound a lot like the “Return to Normal” phase on that “stages…” chart.  if that read is correct, this rally will most likely fail when the masses least expect it (probably short or maybe even above 1265) and with a good chance of waking up to a big ‘ol “WTF?!” gap down to catch the most number of bulls and bears off guard. if i’m wrong and this is just another great buying opp in a powerful bull market about to shoot off to new highs, then i will miss out on a lot of gains into year’s end.  however, although i won’t be 100% long if/until the markets take out the 5/2/11 highs, i won’t be fully short either.  took one hedge on friday, might take some more this week or maybe cover a few shorts.  undecided yet whether to be in cash or trade long/short…market neutral if there is any follow-thru to the upside this week.  g-luck and be careful long or short here.