Stock Market Neutrality....

Stock-Markets / Stock Markets 2012 Jun 23, 2012 - 08:49 AM GMT

That's what we're dealing with, a lot of neutral messages. When I studied the charts late in today's session, I noticed many different buy and sell points on all the daily charts. It didn't matter whether I was looking at an index chart, or the chart of any number of individual stocks. They all had mixed messages behind them. For instance, most charts printed inside days meaning the candles from today traded inside the previous day's stick. In addition, they did so near the bottom of yesterday's sticks. They also did so on lighter volume. All of this usually means the trend will follow through again on Monday. However, if I study the MACD's, they look different. They are holding up well with the slow or negative line racing up to the fast or positive line. That usually happens when things are more bullish. There's the problem for playing long or short. It's unclear.

MACD's should be poor looking in nature, fast lines racing down. When you fall hard and have an inside day, the set-up should be bearish on the oscillators. They aren't. They may become so, if we can gap down hard on Monday, but for now, they're not. They're simply not, and that makes playing very complicated. Basically, it makes the market unplayable. Not necessarily what we like, but clearly the way it is, and you should never fight what's set up. I wouldn't be shocked if we're up big on Monday morning, but I also wouldn't be shocked if we're down big on Monday morning. News over the weekend will also have a say on things.

As the saying goes, when in doubt stay out. There are no true buy signals, and clearly, no true sell signals in place. It is a very frustrating market. However, all you have to do when it gets like this is to be patient and wait for a better set-up to take place across the board, and then you attack it, no matter how long it takes. For now, neither side can claim victory as the bears were unable to follow through in any way, shape, or form from yesterday's big sell off. Friday's normally are bad when you're in a bear market. Friday is normally a day you follow through as folks are afraid of holding into the weekend. That wasn't the case today. Things are neutral. It's as simple as that. No one is control on any major level. Neutrality rules.

This is really such a crazy environment, if you step back and think about the way the market works, and how hard it is to establish a real down trend. Last night Moody's came out and downgraded all of the major banks from Citigroup, Inc. (C) to Goldman Sachs (GS). Morgan Stanley (MS) was on everyone's mind because, get this, it would be considered good news if they were ONLY downgraded two notches, instead of possibly three. You can't make it up. This was actually good news. It would send the bank stocks higher to be downgraded less than thought. In the end, Morgan Stanley was downgraded only those two notches, thus, off they were to the up side.

All of them were downgraded, yet every one of them went higher today, JPMorgan Chase & Co. (JPM), Goldman Sachs, Morgan Stanley, Bank of America Corporation (BAC), Citigroup, and a few others. It's hard to kill a stock market when you have so much on the side of the bulls from interest rates being too low to go elsewhere, to the fed having your back if things fall apart here or globally. So naturally downgrades were a positive. Only in this market can that become a reality. If this is all the bears have because these downgrades were already factored in, they don't have very much, I would think.

If you study the charts available for your viewing tonight, you can see we're pretty much in the middle of nowhere. If you use the daily chart the wide, and loose wedge measures nearly one hundred points from 1380 to 1280, give or take a few points. If you use the weekly chart, the wedge is much bigger, with a breakdown occurring only if we lose 1265. The breakout being 1415, give or take a few points. That's a huge wedge to say the least. It can last a lot longer than any of us would ever hope for, tremendous whipsaw within the confines of such a huge wedge. It makes trading very difficult, and almost entirely dependent on news from both here in the United States and from Europe.

On that front, you never know what will come out from day to day. If the bears can break below 1300 where there is strong gap support, they can possibly make a run towards that key 1265 level on the S&P 500. Just getting through 1300 will be a huge task. The fight is currently at the 1335/1340 area where there's old support and resistance horizontal price action, and some key exponential moving averages. Back and forth we go just at that area alone. Sadly, these wedges may cause the action to remain unclear and full of whipsaw for months to come.

The best thing you can do for yourself right now is to keep it extremely light. Don't over play and don't get frustrated because of the environment we are all having to deal with right now. It's a game of extreme patience. Learn how to live within the confines of what we're up against for now, until a more directional move can take place. Slow and easy with no more than 25% exposure short or long at any one time would be my advice. Also, you should be in 100% cash quite often.

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.

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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