A Classic Dilemma

 | Sep 27, 2011 | 10:48 AM EDT  | Comments
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SDS

We have the classic dilemma this morning of a big gap up following a big move yesterday. The logical thing to do is lock in profits, but the intensity of this move caught so many by surprise that most folks are underinvested.

Most traders I'm talking to feel frozen. They are underinvested but having a tough time putting cash to work as the market dances to European headlines. Finding good chart setups for position trades remains extremely challenging.

Weaker-than-expected consumer sentiment is being ignored so far, and even talk from German Finance Minister Wolfgang Schaeuble about how the European Financial Stability Facility (EFSF) plan is a "silly idea" is being shrugged off as well.

The machines have their buy programs activated and with so many folks anxious to fade the strength, the chances are high for a squeeze higher before any meaningful reverse.

I'd love to load up on some new longs here, but I don't see any. I've taken some ProShares UltraShort S&P500 (SDS) for a trade and I'm looking to average in, but I'm keeping it small until we test the opening trading range one way or the other.

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