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Stock Market Solid Action At Key Resistance....

Stock-Markets / Stock Markets 2012 Jan 12, 2012 - 08:22 AM GMT

By: Jack_Steiman

Stock-Markets

The bears will make a strong argument that the consolidation is more like churning at key resistance. The bulls will tell you that the market is holding very well at the breakout point, although the S&P 500 is still thirty points away, but needs to clear the old highs at 1292 to get things rolling. If they can do that, then they can challenge the July-high trend line that comes down around S&P 500 1318/1320. I have to form an opinion, of course, about how I see things, and I have to say, it looks more favorable than not. I wouldn't bet the farm, or even a bedroom, on it, but the bulls look to be gaining more and more control on the situation.


Sometimes a market needs to unwind the oscillators on different time frames to get things set up for another attempt at moving higher, and since the old high at S&P 500 1292 is key resistance before the big one at 1318/1320, it's fine that we're holding so close to this level. The bears are seemingly unable to bring this far below the key 1292 level, therefore, the longer it can hold up as the internals unwind, the better the opportunity for the bulls to get things moving higher once again. It's an arduous situation as the moves are coming in very small increments. We would all like more action one way or the other, but with the VIX so low, the market is dragging along, but again, more on the side of the bulls. Good action today when all was said and done, but keep in mind that in reality, the bulls have yet to seize 1292 on the S&P 500, and that's step one with regards to testing the trend line at roughly 1320.

A market of rotation is what we're seeing. Day after day things change. What's good goes bad, and what's bad goes good. This is the way the two sides are fighting it out. The bears are able to keep some sectors from doing what the bulls would like, but then the bulls fend off the bears from breaking any of the good sectors down. The market rotation is interesting from this viewpoint. A month, or so ago, the upside action was happening mostly in the defensive areas of the market as foreign money was buying safety away from their own countries. They wanted dividend paying and lower P/E stocks that held little, or less, risk, if anything, went really bad. That's understandable, of course.

Now it seems froth is playing catch up. More risk is being takes as the Nasdaq is starting to outperform. Nothing amazing, but clearly starting to do better than the more defensive areas that were rocking higher previously. The bulls want this, and the bulls are getting it. So, it was another day of outperformance today. The Dow stocks also need more of a rest based on the better performance from weeks past while the tech stocks lagged so badly. The action is more favorable for the bulls for now with regards to risk. A welcome sight for sure if you want the market to try higher in the short-term.

It's put-up or shut-up time. Starting on Friday, when we hear from JPMorgan (JPM), the market will be totally focused on what the top CEO's in this country are saying about their businesses. Will they be guiding their earnings higher, or will they tell us that things are deteriorating far more rapidly than the market would like to hear. No one knows, but this is what the market clearly has been waiting for as Europe has been unable to knock us down too hard. With economic reports seemingly on the improve, the market wants to hear that corporate America is agreeing with what we're all hearing from our Government.

Jobs seem to be gaining traction. That makes sense only if corporate America is telling us that business is truly improving. If we hear it's not, it puts all the good news we've been hearing in question. Who could blame folks for not believing, if the CEO's on the front line can't tell us good things about their businesses. The reports gain traction next week, and for a week, thereafter, so it's going to be a very interesting period here as the market decides what it wants to do once it hears the news from one big leader after another. By early February we'll know all we need to know.

We know the numbers by now, don't we. We know S&P 500 broke resistance at 1267. This level has now become solid support, although we aren't that far above it. The bulls definitely want to make sure this level holds on any selling. 1292 is the old highs, and this needs to get taken out. The bulls have tried for a few days, but nothing bad has taken place, even though they haven't gotten the job done. If we can break above 1292 we can make a run for the big one currently at 1320, where we have the long-term down trending trend line of resistance. A break above that, with a successful retest, and the bulls can safely say we're in a bull market.

Need I tell you just how tough it will be to get that job done! So we watch and learn. If we lose 1267, we have to deal with S&P 500 1249, and then support at 1235, which is another trend line. The earnings season will have a lot to do with what's up next for this market. Interesting and dull times together.

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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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 constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.


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