Expect a meaningful rally to 1120-1130 and then a reversal down

The S&P 500 Index was up 12.4 points, closed at 1121.9 to finish above its 200-day moving average for the first time since Aug. 10. New capital rules for banks and China reported a 13.9% climb in industrial production last month lifted the market out of the gate and maintained healthy gains right into the close.

Bulls are able to charge above the 200-day with determination, as shown by high volume today. The outlook of the market suddenly change. And an immediate charge to the summer’s top at 1,131 is likely.

If you are a long-term investor, it is time to sell some of your non-performers and hold cash. With the exception of certain high-dividend stocks, a better buying opportunity is likely to show up sometime this month after some profit taking. But traders should  review their favorite trading strategies. Puts, inverse ETFs, and short sales are likely candidates. But timing is everything. Early this week, like today, expect a meaningful rally to 1120-1130 and then a reversal down before jumping back into the market.

I am holding small amount of SPXU, with some loss today. This is the core holding in my short portfolio. I am willing to hold it a little longer for this long term bear market. However, I won't add any more short position right now until the bulls momentum subside. If this market want to go to the extreme way, it could reach 1150-1155 zone which is the 68.2% retracement level from the high of 1220 to the low of 1010.