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Stock Market Seesaw...Chop...Handle...Lateral...All The Same...Nauseating...

Stock-Markets / Stock Markets 2014 May 10, 2014 - 11:22 AM GMT

By: Jack_Steiman


We can come up with many different ways to explain 2014. All the words in the title apply, and all those words equate to massive frustration for the average trader out there who hasn't been washed out of the game from the decline in froth stocks. Many have gone away, but those still surviving can't make sense of anything and are playing on emotion, which is never a good thing for the wallet. The market had the usual two days today wrapped in a single session with the S&P 500 near a break down and then near a break out.

But, of course, neither one took place. There were the usual head fakes on both sides. This is the action just about every day, if we're lucky enough to get that kind of volatility. Many days are just total boredom with a small amount of movement within the key index charts. Just noise to nowhere. There is no way to know how long this will all last. We are all hurting for a directional move, even if it's higher, which makes the least amount of sense, but more on that later. Just do something that gives traders a chance to dig their heels in a bit and play with a bit more certainty. For now, we simply witnessed another day of noise in the land of nothing. Neither side doing anything important. Just continued boredom. Sadly, this could last quite a bit longer than we'd like to think possible. That's already occurring, and may do so for quite some time to come. Let's hope not.

If we move higher then we have to worry that it will be a head fake. We may break out on the S&P 500 and Dow, but with terrible sentiment numbers and bad divergences on the weekly charts, not to mention poor looking monthly charts. Can we even trust an initial breakout if it occurs? I suggest it likely wouldn't last. Likely a head fake, but we can't know that for sure. Maybe a one to two percent breakout that gets sold hard. One more suck them in and spit them out episode for the bulls. I'm not saying we will break out over 1897 on the S&P 500. It's just that if we do we have to worry that the move won't hold.

There's so little to trust in this battle of rates versus sentiment and negative divergences that getting overly involved in this market may be tough to do for many months to come. It's not about being afraid to play, it's about knowing what the headaches are, and how they may play out on a breakout, should it happen. If we start to break out you'll be dealing with a bull-bear spread at or over 40%. That usually turns out badly. So it's no fun now and probably won't be for the foreseeable future. Just recognize the truth and adjust accordingly. Do what feels right to you, but know the truth, so that you can at least make solid, informed decisions.

The very best thing that could happen to this market is for it to get crushed hard. The reasons are twofold. First, it would completely wipe out the existing negative divergences on those weekly charts, and second, it would turn the bulls bearish, allowing for a blast off higher later in the year. We don't often get what we want, at least not the way we'd like it. Sometimes it materializes, but when we look back we say "oh, that's how it eventually worked itself out." Not how we would have thought, but it still got there after something else happened we didn't initially see.

All of this tells us to play stocks only that have no froth attached to them. Also, lower beta with higher dividends. No guarantee they work, but at least they'll hold better, even if the market falls and ultimately breaks down. It's still all about 1897 and 1860 on the S&P 500. The breakout and breakdown levels. The old highs on the breakout and the 50-day exponential moving average on the breakdown. In between, keep it light. The market is difficult and no fun. Make sure you don't allow that to cause you to do some not so smart things.

Have a nice weekend!



Jack Steiman is author of ( ). Former columnist for, 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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© 2014

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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