Buy the life high?

I really don't like being long up here, way up in the stratosphere.  Even for short term trades that are exited by the day's end.  There's just something uncomfortable about buying the all time high - it's obvious these aren't very good prices.  Everyone can see that.  Those who enter the market at bad prices are usually left holding the bag when the market makes a fool of them, so in the interest of self-esteem I'd like to think I'm better than that and besides, why take the risk?

Except, this market cannot stay off its high. Come awful volume, pitiful participation, the supposed end of the Fed's quantitative easing, and the tightest ranges in the entire S&P's history, the horrible upgrind continues.  More times than not, the only thing to do is to "BTFD" and wait for price to inevitable resume the tortured uphill crawl if one hopes to make any money at all.

This post goes out to those who share my hesitations and reservations about trading from the long side in a market that feels like it's going to die while at the life high.  Today something interesting occured that I'll share below, which increased the probabilities that a buy so close to the life high was actually the only good trade to make.

12/3 Auction, and what I was listening to as I took the screenshot.

Context: Yesterday was a relatively strong rally, with the overnight low corresponding with the upper distribution's low in the 63 area.  Continuation is likely, especially since the all time high is nothing more than a magnet.

Developing context: Market opens and (of course) rallies above yesterday's high. Period C marks the high, market falls back, and then period D touches it before nicely falling off.  At this point we have a "bad high", meaning the odds are good that the market will revisit this area and go through it.  The only question is when - plenty of poor highs (and lows) have lasted days, even weeks before they are finally taken out.  So, going long solely on this isn't advised.  We need more before assuming risk, especially the long-at-the-life-high kind.

This is where today's market got interesting.  As you can see from the annotations above, the market touched the high two more times, and then even gave an opportunity to enter at the nearest support level.  With each touch, the chances of the bad high holding on the next touch diminish more and more as it gets "badder" - and you also have to think about those trading against the high.  Where are their stops? Probably clustered in two spots: a few ticks above the session high, and around the life high.  Since the session high is so close to the life high and so much trade has occurred by the session high, it's reasonable to believe that any move above the high will go all the way through the life high as many stops get hit.

Combined, these reasons created enough of a motivation to take this trade, even at such bad prices.  Just make sure you get out before the stop run (which is all this ever was) peeters out and the market comes falling back down!