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MARKET HITTING SIGNIFICANT RESISTANCE AREA
I hope everyone enjoyed their holiday...and I hope you are looking forward to a great year. The major indexes finished the year where they started which hasn't happened since 1970. The bad news is that the sideways movement hurt trend followers this last year. The good news is that it's been 40 years since we've seen this type of non trending environment. Here's to the hope that we won't see it again for another 40 years...I should be dead by then. Now that the holiday vacations are over, I would expect the market to start trending again. Th
e big question is which direction will it go? I don't think anyone in the market knows that answer for sure right now...at least not with any sort of conviction. The choppiness of the market over the last few months has left both bulls and bears a bit wounded...no matter how smart or successful you are. These are often times when people start looking for the next guru or stock market genius to come in and save the day with their revolutionary trading system. Don't fall into that trap. Every trading system will get knocked around by the market at one time or another. This is what makes the market work for so many people. We are at another critical area in the market. There is a trend line in place that the market has reacted to for most of the last year. This trend line would suggest that the market is nearing resistance and should start to move lower soon. The trend line coincides with the resistance levels that I mentioned back on November 30th. If the market is going to turn lower, this would be the area where it should turn. There is a chance that we could move a bit higher and still be within this resistance zone. The numbers I posted on November 30th were about 12,500 for the Dow and about 1295 for the S&P 500. If we break above these levels, we would likely see the 50 day MA move above the 200 day MA on the S&P 500. That would be a pretty strong bullish signal and
would suggest that the trend might continue higher for a few more months. As you already know, I am mostly in the bearish camp. This doesn't mean that I won't switch to bullish if it looks like the trend is clearly moving higher...and the key word there is "clearly". I don't think anything is clear at this time...bullish or bearish. If we break higher, I like GOOG as a bullish pick (that was a significant breakout when it moved above that $630 resistance). If we turn lower, I like PNRA as a bearish pick (thanks to Naseem for making me aware of that pattern). PNRA shouldn't get back above $145 anytime soon. The initial downside target would be around $130...with $115 after that.
e big question is which direction will it go? I don't think anyone in the market knows that answer for sure right now...at least not with any sort of conviction. The choppiness of the market over the last few months has left both bulls and bears a bit wounded...no matter how smart or successful you are. These are often times when people start looking for the next guru or stock market genius to come in and save the day with their revolutionary trading system. Don't fall into that trap. Every trading system will get knocked around by the market at one time or another. This is what makes the market work for so many people. We are at another critical area in the market. There is a trend line in place that the market has reacted to for most of the last year. This trend line would suggest that the market is nearing resistance and should start to move lower soon. The trend line coincides with the resistance levels that I mentioned back on November 30th. If the market is going to turn lower, this would be the area where it should turn. There is a chance that we could move a bit higher and still be within this resistance zone. The numbers I posted on November 30th were about 12,500 for the Dow and about 1295 for the S&P 500. If we break above these levels, we would likely see the 50 day MA move above the 200 day MA on the S&P 500. That would be a pretty strong bullish signal and
would suggest that the trend might continue higher for a few more months. As you already know, I am mostly in the bearish camp. This doesn't mean that I won't switch to bullish if it looks like the trend is clearly moving higher...and the key word there is "clearly". I don't think anything is clear at this time...bullish or bearish. If we break higher, I like GOOG as a bullish pick (that was a significant breakout when it moved above that $630 resistance). If we turn lower, I like PNRA as a bearish pick (thanks to Naseem for making me aware of that pattern). PNRA shouldn't get back above $145 anytime soon. The initial downside target would be around $130...with $115 after that.
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