By: Scott Redler

We never try to guess on what the market will do, but when we get clues we begin to develop a thesis and plan of action if that scenario does indeed play out. It is still early, but it looks like we could be seeing the beginning’s of a rounding top.

Right now, it is very hard to find clean buy set-ups. We pretty much made it to my target zones from a few months back (11,150-11,300 in the DOW and 1,220-1,230 in the S&P). The markets are now selling off some strong earnings reports (REE, YHOO, IBM), and after this week there won’t be many more market-moving type earnings reports.

We peaked at 1,214 in the S&P, then we had the GS harsh down day. Monday we put in a reactionary low at 1,183, which was the uptrend line (which usually holds at first attempt). We just rallied back and put in a lower high for now at 1,210.

The market is consolidating up here and now we need to see what the next move will be. The range will continue to get tight before we see some type of resolution. Now at least we have points of reference to use as a guide as we trade this action. There are still a lot of stock and sector specific trades out there, but lessening your size and being more nimble would both be prudent steps to take at this point.

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