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The Real Secret for Successful Trading

S&P 1200 Remains Too Difficult... For Now....

Stock-Markets / Stock Markets 2010 Nov 22, 2010 - 04:36 PM GMT

By: Jack_Steiman

Stock-Markets

And that's not bad news at all. The market could definitely use more to refresh. A longer time to pause to sell off slowly but gradually. Enough time to unwind those oscillators from neutral to oversold on those daily charts. The longer we sell off slowly the more sentiment will erode. The market wouldn't be best served if we just flew up here. Won't happen in all likelihood, but anything is always possible.


Bottom line is the market is behaving in a fashion that serves it best. It's gradually pulling back without getting slaughtered. That's what normal behavior looks like when a market is coming off measurements made over several months. I know it can be somewhat frustrating, especially if you're over playing, but that's the reality of the stock market my friends. It's not always your best friend and when it's not, only playing less, and more appropriately, will allow you to survive without getting your pockets picked clean. This will also allow you to play harder and without fear when the market says it's time to rock back in down the road.

The more bad experiences you put yourself through now, the less you'll perform up with the market when the time comes, thus, it's two-fold if you play too hard. Relax and go with the flow of the markets message. It says that light playing is best, and that if you do play, nothing high beta in terms of risky plays. Low to medium beta the way to survive best.

Over the weekend the SEC announced that the world will be rocked with the biggest insider buying scam ever. That they have some huge names caught in the act of giving out information in an illegal manner. I'm shocked!! The market not fair? No way! That can't be true! We all know it's on an equal playing field don't we?! Anyway, maybe for once something will get done on a level never seen before. This didn't help the market with its futures this morning. A nice rush lower with those guilty to be financials getting hit the hardest. Goldman Sachs (GS) seemed to have felt it the worst dropping nearly 3 1/2%. Well deserved and well earned. A slaughter that couldn't be more deserving to those wonderful financial stocks.

However, with regards to the stock market, it had little to no effect by the time the market closed for the day. The market shrugged it off and came back strong with the Nasdaq actually finishing green. The S&P 500 and Dow were red, but again, well off their lows. Solid action for sure across the board as the market continues the lateral to down process.

So what's next you ask. The S&P 500 has to close above trend line and horizontal price resistance at 1200 before it can go back and test its highs at 1228. That would clearly set up the symmetrical triangle possibly in play here. We are very unlikely to break out any time soon, but a multi-week to multi-month base would be a good thing for the market as it would spike fear, which has gotten less by quite an amount over the past few weeks.

The longer we go nowhere the more traders hate the game. A very broad-based triangle would really get emotions flying high as we swing wildly within the range. Nothing like a wide and loose triangle to get the masses to hate things so that would be best. A move over 1200 would start that process. 1183 S&P 500 or gap support is next on that side of the ledger. So for now it's really about what goes first. 1183 is key support and 1200 key resistance. The triangle would set up better if we can get through 1200 first.

The very best way to play a wide and loose triangle is, basically, to go cash at the top, or even short a play if you see a great set-up. More than 3 plays below 1200 isn't smart. A drop more above 1200 if right would be fine. There is no way to know how long this lasts, but we have started week three with the range, thus far, set between 1228 on the top, and 1171 on the bottom, although a move back above 1200 sets up a stronger triangle.

Either way this is the range for now with the smaller range stated above between 1183 and 1200. It's also best to keep away from super beta plays although above 1200 S&P 500 on a closing basis could open the door to one play in that arena. However, overall it's best to keep things to lower to medium beta plays as a measure of safety. Play it slow and let the market flash its intentions. For now my focus is on 1183/1200, and then we go from there once one side grabs the upper hand.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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© 2010 SwingTradeOnline.com

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constitutinginvestment advice. Trades mentioned on the site are hypothetical, not actual, positions.


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