Pullback and then Market positioned even better for an upside breakout

A nice pullback would set the stage and make many stock point & figure charts show a hair trigger rise would constitute a breakout.

So buy on the dips while we can.

Last night Jim Cramer finally came around and is now bullish. He posits now that the mechanism for the recovery is cash rich China turning inward and building their infrastructure. We said that a few months ago and compared it to the USA in the 1800s when we grew independently of the rest of the world. We became the world's best investment for almost two centuries. Yes, China puts a safety net under commodity prices and prevents spiraling down of a deep recession. He also pointed out that even he predicted the real estate crises will be over later this year and has a chart counting down the days.

The market is looking six to nine months ahead and seeing improvement in the economy when all the multi-trillion $ bailout and stimulus kicks in. We said before that safe high dividend stocks and Chinese investments were the best choice today with emerging markets closely following. We said that in November when the markets were about 20% lower.

Today Asian markets lost yesterday's gains and Europe will likely decline at least 1%. But we must think of the next few days as a buying opportunity. I was about 80% invested and now I will be happy to go in another 15% as opportunities arise. It is estimated that $9 trillion of money was taken out and is just waiting to go back into the stock market.

Yes, the breakout will likely trigger a short squeeze and panic buying. If that happens and the gains exceed 20% in a few weeks it might be wise to take money out but let some ride. If the market goes up too fast it will likely correct down and give up half of the gains. That is when we want to buy in again on those declines.

Example:
VFINX mimics the S&P 500. A 20% gain would bring it to its next resistance level. If it blows through that we would lighten up. See:
http://stockcharts.com/charts/gallery.html?VFINX