Once Again

The market stalled as the end of the trading week was near. As in recent past, any minor dip the market experiencing bring out those anxious top callers and those sidelined dip buyers predicting a market top and a 10%-20% correction respectively. I’m sure one day, these predictors will be correct. But since I am a market watcher rather than a market timer, I will simply continue to watch what the market is doing and what message it is sending, and continue to move along with the market instead of trying to anticipate its move. As I have said many times, if in doubt, move to the sideline, cash is a position. The worse thing to do is to anticipate the market downward move and short the market at this juncture. Surely if one guesses correctly, one will be a hero, but if one is incorrect and the market snapped back viciously, then surely great damage could result in one’s trading account and/or psyche.

Let’s take a look at the market indices and see what we should be watching for the coming week.

The SP500 made another new all time closing high on Thursday, then fell back on Friday and formed a bearish evening star type of price pattern. It appears to signal a pullback could be coming. If the pullback does show up, the first level of support to watch is 1965. If it can’t hold the 1965 level, then the next possible support level to watch is near the 1950 and the 50 SMA. Once again, until the market has indicated otherwise, this pullback is expected to be similar to recent pullbacks; shallow.

(click on the chart to enlarge)


The DJT continues to put in new all time high, while the DJIA struggle to make another new all time high. The DJIA has been chopping around above the 17,000 level for nearly two weeks. It might need to refuel for the next upward move and to possibly put in a new all time high. This refueling process might take it down to test the 16,700 level, and if it dip below the 16,400 then it will likely be more than a simple pullback.



The tech heavy Nasdaq 100 also show signs of tiring. It made a new multi-year intraday high on Thursday, only to end up closing down for the day. This gave the bears some confidence to take it down somewhat on Friday. But the bulls did step in to lift it to close above the open and printed a hammer like candle. If the selling continues on some of the recent high flying big cap tech stocks, it could pull the NDX to test the 3932 or the 3865 for possible support. Barring any catastrophic catalyst, dipping down to the 3800 seems unlikely at this time.



The index that has the bears growling is the Russell 2000. The RUT has been lagging all the major market indices once again. Since it has made a new intraday all time high after it has caught up with the other indices, it fell back to the laggard role again. The RUT came within fifty cents to match its previous all time closing high. Since its failure to close with a new all time high, it has retreated back to the 1134 support level and it is trying to hold above this support level. If it breaks the 1134 and the 1126, then the likelihood for it to retest the 1097 is high. When it does get to the 1097, the double top callers will be screaming and cheering “I told you so!” But of course, it doesn’t matter how good or how lucky one’s guess is, the ultimate question still remains to be “Did you make money?” In other words, did you put your money where your mouth is!



Once again, no one knows the market has topped until it has topped. Until the market has informed us that it has topped, continue to trade defensively and cautiously.