Nothing Bullish...Nothing Bearish....Still!
It's so easy to get bearish when the market is down three days in a row. The market being an emotional machine it's very easy to get caught up in the very short-term and play on what you think will therefore be coming. Instead of simply being bullish or bearish, maybe it's best to take a look at those daily index charts and see what the message is in them. On this six-day down trend, you can see none of the major indices went below key support at the 200-day exponential moving average. The Nasdaq 100 was actually the one index that tested it. The S&P 500 and Dow didn't come close. All of the key exponential moving averages have to go away with force in order for the bears to be in full control. Forget that there's also good support not too far below those key exponential moving averages. That would also have to be broken by the bears, but at the very least, you have to remove all of those moving averages. And that just didn't happen. Close but no cigar, my friend.
Every time the bulls look like they're about to take control, you'll hear that now they fail to make a breakout. No different for the bears. Six straight days down, so now here we go. Breakdown city. Not to be. The wedge is in full control of things. Neither side is doing anything to make that wedge become a memory we'd all love to see, especially since the wedge is now seven long months old. It's been a drag psychologically to the masses, whom seem to be giving up since we're totally directionless. Forget the past seven months. If you look at the past seventeen months, yes, I said seventeen months, the markets are almost flat. It doesn't get more boring than that. Not only boring, but incredibly frustrating to most as the whipsaw is leading to a lot of bad trades. It’s understandable. Sadly, we're probably going to be dealing with that for quite a while longer.
Today started out very flat early on pre-market. The market was watching the futures as JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC) were about to announce their earnings for the last quarter. Both came out and did a decent job. Initially both stocks moved lower. Futures went from being up a bit to basically flat. Oh boy, here we go again. As the morning wore on, the bids started coming in for both stocks, which allowed for a move higher on the futures. Nothing great but up a bit, which was a relief, since all we do lately, it seems, is fall. Six down days in a row will play on your mind that way.
The market opened higher and kept on going, gradually climbing higher, with the S&P 500 and Dow blasting back above their 20- and 50-day exponential moving averages. The Nasdaq 100 lagging badly, but still trying to work its way through. It’s just the type of action the bulls needed short-term to keep everything in question for seemingly the fiftieth time these past several months. The bulls needed a day like today to put the bears back on their heels. It was starting to look more favorable for them as they were close to removing those 200-day exponential moving averages, but now the bears will have to deal with removing all of the key exponential moving averages again to gain the upper hand. That will not be easy. While today does nothing for the bullish case bigger picture, it at least stops the bears cold in their tracks for now. And so it goes in this large annoying wedge. Having fun yet?
There was the usual non-confirmation today. The Nasdaq 100 continues to lag behind the Dow and S&P 500. Don't get me wrong, it was nice action overall, but in a bull market froth leads, not lags. Stocks like Priceline.com (PCLN) and Apple Inc. (AAPL) up 12-20$, on a day like today. Not the case at all. Many large-cap leading froth stocks were actually red for the day, and this isn't what you want to see, or normally see, before a market goes wild to the upside. The risk trade mostly off. Folks favoring lower beta and lower risk stocks. I can grasp that thinking, but in the end, you want to see the froth leading the way. It didn't do that today so I'm a bit more concerned than I'd usually be on such a nice up day. It’s something to keep an eye on if things continue to the upside short-term. If we move higher still and froth leads, then you can get far more bullish in nature.
In markets such as these, you have to traverse the playing field very slowly. You pick spots carefully, and keep stops very tight along with taking gains along the way, and never being greedy. As the market continues to play tag with all of the moving averages, they're almost becoming less important technically. If you keep moving back and forth through them, then they are becoming less and less important. But that's normal in this type of large wedge. No one has control so it's understandable, I guess. All you should be doing is picking off a play here and there in this nasty wedge. Nothing more than that or you'll likely get hurt. Be smart in your approach here. Remember that both sides rescue things when things look the most dire for them. Don't get overly bullish or bearish when things are more towards a particular side. Some days things will be easier. They are not easy now.
Go slow and be smart.