The market has caught fire this afternoon. As of this writing, an hour before the close, the S&P is pushing the upper limits of its July highs. If it breaks them, heading to 1320 should be a relative piece of cake.

I haven't had time to catch up on the comments from my prior post, but I'm really looking forward to it. In the meantime, I wanted to repeat that Praxair (PX) looks like a super short. I don't usually give stop prices, but this time I will – – I'm setting a contingent stop of $96.71 on this one.

Regular readers know that I've got a simple set of three rules that I follow in my trading. I like three because it's a small enough list that I can pledge to myself to remember it and stick with it. I don't like lists of trading rules that some people have that go on for pages, particularly since I know they can't possibly stick to them all.

But last night's post got me thinking about changing one of my rules. To explain……….I pointed out that energy, on which I am generally bearish, looked primed for a bullish bounce. A number of folks jumped on me about this, pointing out that yes, perhaps I'd get a day or two of strength, but why would I want to be holding a security that was generally weak in a bearish market? (For the record, I haven't opened a single bullish position today, and these comments made it likely I won't at all).

So I considered the topic more broadly, and it cut to the nub of the problem I have in markets less friendly than this, which is that I trade against them. In other words, over the long haul, the market generally is owned by the bulls, and it's financial suicide for me to trade against them. As Gary has so long tried to tell me, why not simply trade with the broad trend?

So I'm thinking of kicking out the weakest of my three rules – – not to trade in the first 30 minutes – – and replace it with "Trade only in the direction of the primary trend." In other words, if the recognized, multi-month (multi-year, even better) trend is up, then trade bullish. If it's down, trade bearish.

Now that probably strikes you as about as useful as the Warren Buffett rule I offered yesterday morning, but I am serious. I believe the primary trend right now for both energy and equities is down. I have profited nicely from that this year. In last night's post, I was contemplating a pretty wide variety of bullish trades in energy for the very short-term. This rule would stop such trades in their tracks.

The prerequisite to such a rule being useful, of course, is to have properly identified the trend. If from 2003 to 2006 I ran around saying it was a bear market, my rule would have been not only useless, but harmful. But we need to assume that a consensus has been reached amongst thinking folk like Slopers and we're trading along with the primary trend.

The other drawback to this rule is that it tends to ruin opportunistic trades, such as playing big bounces in a bear market. For instance, back on July 16, I bought a bunch of CSK simply for a bounce, and on July 18, I sold it for a 40% profit. That's all well and good, but now, a couple of weeks later, it's down 50%. To save you the trouble of getting out a calculator, a 50% drop would have meant a serious loss. So I would have denied myself that nice trade, but I would have also avoided needing the dumb luck required to have hit it at just the right moment.

I'd be interested in your thoughts. I try to be very economical with my words when constructing these rules; I treat them like proverbs. Any refinement or other ideas would be appreciated, since in my experience the collective body that meets here on Slope does a very good job learning from one another.

Today the market rallied over nothing. Hence the title. The Fed, as by now you all know, kept interest rates exactly where they were before. The Dow rocked well over 300 points higher, and equities across the board zoomed upward while gold got pummeled again.

Prior to the opening, I had an interesting experience. One of the readers here – – I won't name him, but he's a good guy, and I respect him – – mentioned I was sounding "arrogant". Now my first reaction was to dismiss him as simply wrong, but I quickly told myself – – that's what an arrogant person would do! So I took my emotional temperature and told myself to listen to what he was saying. If a thoughtful, regular reader jabs me like that, I probably need to take stock of where my head is at and make some adjustments.

Now I'm not talking about adjusting my writing. In all honesty, it's not like I was being a blowhard. But there was enough "attitude" that he made a remark, and I decided that was a good signal – – much better than any technical indicator! – – that I'd better embrace humility, take a lot of positions off the table, and center myself. So that's what I did.

It may seem bizarre to have one word from one man (whom I've never even met) compel me to close out six figures worth of positions, but one of the cool things about doing this blog is that it gives me a mirror. And when that mirror starts to look ugly, I know that I need to adjust things. (Conversely, when I'm losing money, and I'm beating myself up, the pats on the back and "things will be ok!" reach a fevered pitch just before things turn around for the better).

Not to say that I didn't lose money today. I gave back a portion of yesterday's terrific 15% rise. But I definitely preserved a lot of profits that would have otherwise been lost.

With the big push higher in equities, we must ask ourselves again if we're going to march all the way up to 1320 on the S&P. But keep in mind it would only take one more day like today to get us all the way there! It's only 2.7% higher from here.

The Dow's next reasonable resistance is at 11,700. If it breaks that, I'd say it's heading to just below 12,000.

I have some Russell puts, and they're down about 20%. I'm on the fence whether I'll hold on tight or just dump 'em and wait for a better buying spot.

The resistance for S&P is as plain as day. Stop #1 is about 1292. Stop #2 is 1320. Simple as that.

The chart of crude oil below looks pretty bearish, but you'll be surprised to hear how bullish I am on energy in a minute. As I've been saying, though, crude could head toward $110 or so before turning higher.

$UTIL, you old beauty! Even though it went up today, this is a great pattern. As with ICE, I've drawn two necklines, since I'm not sure which is the real one. It's busted them both, however.

Now, on to energy. I've made a lot of cash being an energy bear. I think I'm changing costumes tonight. Off comes the furry head, and on comes the one with horns on top. I think there are a lot of exciting technical opportunities on the bullish side of energy and commodities. Just look at XEC. That horizontal line is pretty exciting looking, if it holds. (Yes, I just described a horizontal line as exciting; pity me).

The energy plays fall into two camps. One is the [exciting] horizontal lines. The other is retracement to major trendlines. DO is an example of the latter.

GDP has an XEC-style situation.

One thing that I think will help push energy higher is that I think gold is due for a bounce. Poor old gold! This thing has gotten just creamed!

Excitement is ubiquitous.

POT got smoked, and put holders prospered. Now I think we could be in for a 20-30 point bounce higher. Long-term, I think this is going to be a bear's delight, but why not play it both ways?

I also tripped across this little beauty today, and I bought some.

Setting aside my bullishness on energy for a moment, CEG is a pretty interesting looking toppy pattern.

And I think I'll sell my puts on MOS first thing in the morning. We've touched the retracement, and I'd like to re-enter if the price gets back to the next Fib up, which is at about $126.

I bought more PCLN puts today, and I'm glad I did. This thing is down $17 after hours tonight!

Ah, and good old BAC. This is what we technicians call the Farting Around Pattern. What on earth is this thing doing? When it breaks, it's going to break big (either up or down).

I am so behind on my emails, I really need to attack those. Thanks again for visiting Slope of Hope, and be sure to come back tomorrow! XOXOXOXO.