Bracing for a Pull Back

As could be expected, Friday's short trading day occurred on very light volume. There is not much to be gained by trying to analyze performance on this slow holiday weekend trade day. Longer term charts are in very healthy conditions and investment dynamics at this stage support a long term rally to continue. Short term however we should expect a pullback. It is very likely we will get a harsh retracement at some point this week, which will serve to shake out the weak hands. Dips continue to be buying opportunities but dips can also increase the risk on short term trades. The positive side to the equation is that pullbacks help reveal where the strength and weakness is. During rallies all ships (or in this instance stocks) rise with the tide of the rising market. During pullbacks the strongest stocks will do a better job at holding support levels while weaker stocks get hit the hardest. This is because profits from weak stocks are redistributed into stronger stocks. In the long run this will give us a clearer picture where to distribute our money to get the best risk/reward.