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Stock Market Holding...Whipping Between Support And Resistance...

Stock-Markets / Stock Markets 2013 Feb 16, 2013 - 12:06 PM GMT

By: Jack_Steiman

Stock-Markets

The market has had a way of holding up into multiple overbought episodes across all of the major index charts on their dailies. At some point, it will fall very hard, but for now, there is nothing indicating that this will happen now. We are not getting the type of market opening candle-stick prints that would suggest something nasty is upon us, although the market doesn't always have to be that friendly and give us a warning sign we can count on. A large gap up that closes with a black candle or worse yet, a red one, would indicate the market has topped out for the short-term, and that you should be in mostly, if not all, cash. You can even take a short or two on the indexes.


For the moment, however, the market is stuck between resistance on the S&P 500 at 1525, the previous high and support at 1503, or the 20-day exponential moving average. Any trading between those two points on a closing basis is simply noise and nothing else. Any down move may feel bad, but if 1503 holds on a closing basis, it's meaningless. Same holds true on the long side. If we break above 1525 intra-day, but can't close decently above by the close, it's nothing but meaningless noise. Whipsaw in between these two levels would be a good thing, if it can do the dirty deed of unwinding those daily, and even sixty-minute, charts to allow for some more energy to lift us higher still. So today was one of those meaningless trading days with neither side taking out either one of those key levels. The uptrend is still clearly in place, while the market does its churning just below 1525 on the S&P 500.

Even though in the end today was a meaningless trading day, there was one element during the day that was different. When was the last time any of us heard Wal-Mart Stores Inc. (WMT) warn about sales. Their CEO today said that their sales for February were the worst in seven years. The market took about a one-hundred point dive on the news in minutes on the Dow. S&P 500 fell hard, but it's still above 1503 quite decently. So nothing from nothing is nothing. But you wonder when the market will snap given the constant overbought conditions it has been seeing. This news certainly could be the catalyst. WMT fell hard but nothing too severe. It could have been much worse for sure. However, it's an economically sensitive stock and shouldn't be completely ignored when it tells you the consumer is really reigning it in quite suddenly. Yes, the economy is still weak with folks still very concerned about their futures. We need to see if this becomes contagious. WMT may become the bears best friend.

There are always places to avoid, even in the best of overall bull markets. Sometimes something happens to an individual stock such as Apple Inc. (AAPL) that carries it in to a nasty bear market due to the inability to keep growing at a certain pace. There are also times when a sector or two that are related also go into bear markets, due to the trade being a bubble over time. This has happened to silver and especially gold. SPDR Gold Shares (GLD) has taken a nasty journey on its way to stair-stepping lower ever since it began its distribution volume decline off its 185.00 tops seventeen months ago. It has been putting in a series of equal or lower highs as it breaks down. The fear trade is slowly, but very surely, going away and that's why the decline in the commodity. Mr. Bernanke is making it more difficult for the gold bulls when he makes statements relating to inflation being under control, and other statements regarding better health for our economy. With GLD in a bear market, it's probably best you lose some of your excitement for those play. It's best to focus your energy now in other areas of the market that are working better.

Some of the daily charts seem to be better technically than others. The Q's look better in terms of MACD, etc. than the S&P 500 or Dow. Stocks, like AAPL, continue to struggle, however, and that's causing a strained tape in that sector more than others, but it's hanging decently well considering the weighting in that stock. If we lose 1503 on the S&P 500, there's major support between 1470/1480. Only if we start losing this area of support do we need to be a bit more concerned. The market is very tough here, so, please, continue to keep things light. Exposure is fine, but not a lot, especially on the higher beta side.

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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