Expecting a 5% correction from here.

I think the rally has been overextended.

While this is not a recommendation to sell your long positions, it is actually a guide to purchase more at the support level.

I see a good support at 10870. And that’s the 38.2 Fib line, and also a previous consolidation range.

This is a 5% expected correction. It is based on selling the news of the Republican victory and the official announcement of QE2.

Surprising job numbers helped curb the correction from happening earlier on. However, with the increasing number of shooting stars all across the S&P 500 stocks, it is an ominous sign that a correction is awaiting us.

The reason for the delayed correction was due to OBAMA’s willingness to discuss the extension of tax cuts to all people (including the 2% rich fat cats).

This is because, investors may not need to sell off their shares to capture that tax break. This severely reduces selling pressure and any fluctuations from here will be caused by traders and short term speculators.

The market is too hot right now, DOW at 12000 seems so close. Just 2 months ago, everyone was so pessimistic. And suddenly, they are overly joyful. This is another warning sign.

Nevertheless, stay long is such a market, and perhaps consider short term short positions.