Shake & Bake

The SP500 has been stuck in the range between 1170-1185 for the last couple of weeks while the Nasdaq broke to a multi-years high. The tech sector has been carrying the weight for the SP500 while the financial have been struggling. Looking at the price actions of many stocks from different sectors, it appears the market is ready for some shake and bake with the climatic conclusion of the mid-term election and the Fed’s QE2 announcement.

My stance is no matter what the outcome is from next week’s activities, the market is biased to head higher after the shaking is completed and 1220 level is still the upside target for the SP500. Until the dust is settled from all the catalysts that been brewing (pricing) in the market, I will continue to focus on short term trades with reduced size.

Here are the charts for the SP500, DJIA, and Nasdaq 100:

SP500:



Nasdaq 100:



DJIA:

Slowing Down

After the SP500 busted through the 1150 level, momentum appears to be slowing down as the major indices getting near potential resistance. Being this is an options expiration week, things can get dicey.

The following charts for the SP500, Nasdaq 100 and the DJIA show how these indices are bumping up against trend line resistance with declining momentum highlighted by the MACD histogram. Presently, there is no clear indication the market is reversing. Since the market has not shown any sign it has reversed, it would not be wise to go short at this time. In the meantime, I will be tightening up the stops for the longs to lock in profits and/or to preserve capitals. I am not eager to establish new long positions until the approaching resistance has been broken and tested.

Notice the price channels drawn in the following charts. If these price channels hold, then the likelihood of a near term reversal is high as the indices retrace from the resistance level.


SP500:



DJIA:



Nasdaq 100:

Rally On!

After spending the last week consolidating some of the recent gains, the market resume it move to higher high. Today, broad market participation help pushed the SP500 through the 1150 level and closed at 1160.75, and the DJIA closed at 10944.70 after it has come near the 11,000 level. More importantly, the Russell 2000 along with the DJ Transportation index finally join the rally by breaking above their June/July high today.

To be honest, today's move did catch me a bit off guard. I was expecting this rally to resume after additional pull back. But the market don't care what I expect, it move when it is ready to move. I am not one of those that trying to be right in calling the market, I'm just trying to be on the right side of the trade to make some money from the market. So when the market say "Rally on!" I'm in.

A lot of market participants are still skeptical of this rally. When the SP500 explode passed the 1170 level, these skeptics will rush in to catch this moving train. The price actions are saying this market is moving higher, don't let those nay-sayers deter you from trading this rally. October will be October, and I will long this market until the price actions tell me its time to take the money and run. Of course, always manage the risk. So rally on!

SP500:



Nasdaq 100:



DJIA:



DJ Trans:



Russell 2000: