MARKET INDECISION

The market is going through a period of indecision or possibly a sector rotation. There were a couple of days last week where the bulls looked like they were ready to take the market higher...only to see the bears bring prices down. So far, the bears seem to be gaining the momentum. The volume on the down days has been higher than the volume on the up days. I mentioned last week that I was worried about a possible "suckers rally" or "B" wave due the the lighter volume on the rally. That seems to have played out. The drop over the last two days could be a "C" wave. If that is correct, the market should rally higher soon. If that is not correct, the market could be in for a much larger correction. That is the dilemma right now in the market. It really could go either way. The charts of the major averages look like bullish ABC patterns, but there are many warning signals that a larger correction could be underway. It looks like the institutional investors are pulling money out of technology, energy, and commodities and putting it into Consumer Staples (Coke, Pepsi, McDonalds, etc), Healthcare, and Utilities. If this is a rotation out of tech, energy, and commodities, it could seriously threaten the Bull Market. These sectors have led the Bull Market since it started in 2009. The move to more defensive positions (including Treasury bonds), signals the professional's confidence in the Bull Market might be waning. On the other hand, I haven't seen a significant spike yet on the VIX which tells me there isn't a lot of panic...not yet. That could change quickly. The bottom line is that the market really could go either way. From a trading stand point, I'd want to lighten up on my positions and make sure I had stops on any current trades. This is not a place to get too aggressive...bullish or bearish. On the bullish side, I'd want to see at least two days in a row of strong buying...with strong volume. Don't be too afraid of waiting for bullish confirmation. If the buying picks up and the uptrend continues, the S&P 500 should run up to around 1400. This would give you plenty of time to participate in that move. No need to guess it right here. If the S&P 500 drops below 1295, there will likely be easy money to be made on the downside. There would likely be a drop to at least 1250....or much lower. Be patient right now. Like I've said over and over, the market doesn't always pay us when we want to be paid. If you are patient, you can often end up making some "easy" money. If you're not, you might end up giving the market your entire trading account.