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Stock Market Trading Between The 20's And 200's...

Stock-Markets / Stock Markets 2016 May 24, 2016 - 10:54 AM GMT

By: Jack_Steiman


For fourteen of the past fifteen days the S&P 500 has been trading between the 20- and 200-day exponential moving averages. Neither side has been able to take control. Boring beyond words. Day after day we move basically nowhere. The volatility is gone for now. I have no idea what catalyst will come along to allow for a breakout, but you don't know if you can even trust when the move occurs. The 20-day is at 2059. The 200-day is at 2024. When one breaks we should expect a directional move. It should, but who knows for sure. This market has opposing forces working. The bulls have the Yellen. Low rates are here to stay. Yes, we'll see a rate hike in June, but she won't be promising anything aggressive after that as the global economic environment is not good. Rates will still be very low after the June hike, so big money won't likely be running out.

If Yellen promised rapid hikes, one after the other, then the market would simply crash out, but there's no chance that will occur. So we deal with an uncertain market day after day, but since the spread is only 1.5% the market will be forced to make a move soon, and trust me folks, it could go either way. No new catalyst is at hand, although it's amazing how one shows up when it needs to. The daily charts are slightly more favorable than not, so the onus remains on the bears to take away the bullish trend. MACD's have unwound to zero, or below with stochastic's, and RSI's all in fine shape. Of course, that guarantee's nothing as the wrong news can take away the good vibes on those oscillators. Bottom line is for the short-term the focus is on S&P 500 2024 and 2059. Hopefully, the powers that be will show some mercy and allow the market to finally make a move. It can't happen soon enough for this writer.

One thing that can't be argued is that the market has handled every drop of bad news out there without blinking. Negative divergences are still there on the monthly index charts. Declining economic activity is still part of the global picture. The S&P 500 is trading near a 24 P/E, while earnings decline. Impossible to sustain one would think. Yellen is telling us that we have the rate increase coming in June. Nothing has hurt this market. I don't understand it, to be honest, but the bulls are still in overall control. Other than something very unexpected there is nothing else this market should have to deal with short-term that would be considered bad news.

If something positive were to come out of the blue, such as next month's ISM Manufacturing Report, then this market would have a positive catalyst to help it out. We'll get that report right after we come back from the Memorial day holiday next Monday. It doesn't have to be anything amazing. You get the feeling that since the market is hanging in so well, it would only have to be a drop of good news to get the bulls screaming for more upside action. We take it day to day, hoping for a move above 2059 or below 2024, but until it does it's your job not to get overly involved. Anything you play you should consider high risk. Keep stops tight, folks.

One last thing before I go. In markets, such as these, the tendency is to get bored, and, thus, annoyed with the action. This often causes folks to play more than they should. When there isn't much going on and you're staring at the screen, you want the action, and that's dangerous. Don't be that person. Keep it light, and do something else with your time, until the market breaks one way or the other at the levels mentioned above. It is a very boring market. Don't let that cause you problems unnecessarily.



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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© 2016

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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