ACH on Feb08: Take the money and run?

Weekly chart of the March ES contract

The March ES contract is up against the 2011 highs, the weekly IT upleg is up ~ 18% and the rise on the daily chart since the last correction is already greater than 50 points. What to do? Take profits here and wait for a correction of at least 20 points to reenter, or just hold longs because the market will only consolidate in a range of about 10 points?


Hypotheses:


H1 - The market will correct at least 20 points from somewhere around these levels;
H2 - The market will consolidate in a ~10 point range before moving higher.



Evidence:


E1 - NYHL (52 week NYSE New Highs - Lows) has spiked to +400 a few days ago and has been weak since then - a typical behavior before daily pullbacks;
E2 - The weekly bull leg is already 18% long and against strong resistance, similar to November 2010;
E3 - The market action resembles acceleration on the daily chart before a bigger correction, similar to Jan 14-20, 2011 or May 1-7, 2009;
E4 - The Fed has just become more accomodative and the latest employment report is consistent with economic strength so the market may just surge higher.



Matrix:

	E1	E2	E3	E4	Total negations
H1	+	+	+	-0.5	-0.5
H2	-0.5	-0.5	-0.5	+	-1.5

Conclusion:


H1 wins. I will go with the scenario of a correction of at least 20 points from here. I will add to this analysis as more evidence will become available during the next days. Until then, I am waiting for an opportunity to take profits on the remainder of my long position.