Possible events that derail the market

The DOW closed conclusively above 12000 and stayed there for a few days. If it can maintain this level, this market should be bullish over the next few weeks.

Many people, including me, is expecting a correction but it never came in January. It may not come in Feb.

This is the important lesson of trading. Never trade on what you feel but on what you see. Whether it is price actions or earnings, they are pointing to a bull market. I will trade on it as long as the direction maintains. I know my system will capture the downturn when it comes. Fundamentally, it is hard for me to believe that it is so bullish. But I see is what it is. Do not argue with the trend.

I expect some kind of drastic event that will derail the market. Here are some possibilities

• Ten year treasury bond spikes to 5% and money gets expensive
• Crude oil soars to >$130 in a short period of time because of fear of crisis in the middle east
• Ireland default and sends a domino throughout the Euro Union
• Stock prices continue to rise and the FED decides to end quantitative easing

All these events could happen.  One event will trigger another. When it happens, it is usually fast as investors run for cover.

I still expect a 10% correction. It will happen. It should be within the next 4-5 weeks. I am watching it closely and remain extremely cautious as I continue to trade bullish going forward.