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Third Time the Charm for the S&P 500

NEW YORK (TheStreet) -- The third time was the charm for the S&P 500 index. After three tries over the past month, the S&P finally closed at a new all-time high of 1885.52, up 13.18 points. It eclipsed the old high of 1878.

The DJIA closed at 16532.61, up 74.95, and the Nasdaq closed up 69.05 points at 4268.04. The Russell 2000 was up 15.66 points at 1188.70.

This was a well-deserved new high for the bulls. They have been pushing this market since last Thursday, when the S&P 500 held its daily buy trade level of 1842. It has been a straight up, 43-point move in three trading days. Very impressive indeed.

The short hedge funds that pressed their shorts at the S&P low last Thursday are now in the process of covering those shorts. That has added fuel to this market. They are notorious for selling low and covering high, as I have said on more than one occasion.

The one negative has been the volume, or lack thereof, on this move higher. Tuesday was no different. This was the third day in a row with the volume being less than the previous day. That is not a very encouraging sign, but I will not dwell on it too much. This "low volume" theme has been normal in 2014 on up days.

But make no mistake about it, this market is a bull market and the top calling has been futile. Volatility has been common place and "Buy the dips, sell the rips" has been a common theme.

So, where do the markets go from here? I expect to see some continued follow-through Wednesday to the upside. However, the DJIA will be well into overbought territory on an up open. This is according to those same algorithm numbers that have been an accurate guide in this market.

Thus, caution is now warranted and chasing this market is not the proper course of action. If anything, selling needs to be the focus for traders over the next few days because I expect to see profit taking. The trade and trend is bullish, so becoming bearish because we are at a new all-time high is flat-out wrong.

The DJIA will be the only index into overbought territory Wednesday. The other indexes are lagging behind, so they may play catch-up for a couple more days. Much fire power has been used in the last three trading days to set this new all-time high in the S&P 500. I do not think much more is left. So be patient and opportunistic in your trading.

Netflix (NFLX - Get Report) and Apple (AAPL), two momentum stocks, caught a bid Tuesday and moved higher. NFLX closed up 12.66 points to 364.69 and AAPL was up 4.91 points to $541.65.

As mentioned in Monday's column, I added to my Safeway (SWY) position. Tuesday saw me sell that position for a huge gain.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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