What is the state of the economy?
Unemployment in the US is declining:
Housing prices are increasing steadily.
For all intents the US economy seems to be strong.
However, when it comes to trading I like to keep it as simple as possible.
For this I like to use Dave Landry's pattern identification tool. I've found it to be pure genius in identifying what type of a trend the market is in. In fact, I've taken the liberty of "borrowing" a copy to share (I don't think Dave would mind). Here's how Dave likes to identify a trend:
So keeping the Landry method of simplicity in mind, I'd say this chart of the DIA should help you identify the trend you are in.
Trade with the trend.
As a matter of full disclosure, I currently hold a position in the DIA myself.