By: Scott Redler
Is this a tradable bounce, or a new trend? This is the question many traders are wrestling with right now. As of now we’ve had a series of lower highs that keeps this market trapped in a downtrend(1217-1173-1131-1099). As you can see by the chart I attached, each one of these levels were pivot highs, with the most recent at 1099.
The important question is, can this trend change? Today we are on our way to the first distribution day of this new fledgling rally. If market holds 1070-1075 this will show a ton of strength which would be the market holding 2/3 of the recent move. This would be the most constructive scenario for the bulls.
The 50% zone that I think is more likely for us to test is in the 1052-1058 area. This will be the line in the sand for market to remain technically strong. If these levels hold and leaders act well, this downtrend can be broken and then a better sustained move is in the cards. Most prudent traders sold their longs on Tuesday. Some got short S&P after a move from 1010 to 1099. The profitable trade all year has been to sell the extremes, and buy the extremes. “Trade the Range” has been our mantra from the start.
I covered most of my shorts today in the 1077 zone and will see if I can buy around 1052-1058. This market is funny. AA was spark for Tuesday’s rally and it is lower than where it was before the report. JPM also was touted as good report and it was priced in. BAC and GE getting hurt after reports. INTC had its best report in the 40+ year history of the company, and is up less than a dollar. BP was a great long for us from 27-28 and then it’s a sell the news on plugging the hole. DNDN comes out with news it will help cure cancer back in April, then sees the stock price cut in half.
You have to learn the rules on how to trade this market, or you will just be a pawn for the maestro. This market must be timed right, both long and short. This market needs to be measured daily. Black Boxes are also turning levels into zone’s as they are programmed to stop you out of your longs and squeeze you out of your shorts.
The world is a little funny right now, too. Unemployment is seen as 9.5% when it probably is 15% or higher. Kids out of high school have a better shot getting a job by taking a civil service job vs. going to college. You can get a cheaper rate on your mortgage if your delinquent for 6 months vs. having a 750 plus credit score. Government wants to take us to a socialistic system that caused riots in the streets of Europe.
Public Sector makes twice the amount as the private sector, or close to it. Unions still think they deserve a guaranteed 5-7% yearly return on their pensions, when the S&P is down 15% for the decade. King James’ satisfaction ratings were higher then President Obama’s. Overall, there are crosswinds blowing everywhere, but it feels like the prevailing breeze is still downwind.
