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S&P 500, Wilshire 5000, Nasdaq: Current Market Calls for Patience


There are times to anticipate the market and times to stay nimble -- the current situation calls for the latter.

In the last update, I noted the market had entered something of a no-man's-land. I also talked about the S&P 500 (INDEXSP:.INX) level of 1873 as key resistance. That level hasn't been claimed yet, and today we're going to look at another aspect of the argument.

Personally, there are times I don't like attempting to predict the market, because it's simply "too close to call," and I think getting too attached to outcomes at times like that can be dangerous. Certain types of markets call for nimble trading and flexibility of opinion, and I think the current market qualifies. 

As I looked across markets during the holiday weekend, I found at least two charts that cast some doubt on any potential bull case. One of these is the Wilshire 5000 Total Market Index (Full-Cap) (INDEXNASDAQ:W5000), which is basically the entire market represented in index form. WLSH throws a wrench into the ointment (I enjoy mixing metaphors) for bulls because the recent low took the shape of a three-wave decline, as shown below.    

Click to enlarge

On the other side of the coin, the Nasdaq Composite (INDEXNASDAQ:.IXC) captured the target that I noted was most probable (back on April 7), then bounced off the 200-day moving average and the blue trend line that I scribbled on this chart a few months ago. Bears have done what they set out to do here for a potential fourth wave, so further decline isn't required -- though it's not yet clear if the decline is finished. 

Click to enlarge

Finally, the S&P 500 chart. Due to Wilshire 5000 and a few other markets, I'm officially recanting 1873 as a key overlap. I still think it's important resistance, but I no longer believe that a brief break of that level would represent the end of the road for bears.

Click to enlarge

In conclusion, the market remains in a no-man's-land. Sometimes markets are clear, and high-probability targets present themselves (as evidenced by five captured target zones so far this month), but other times, staying nimble is our best weapon against the market. I'm slightly inclined to favor the bears on an intermediate basis, but this is as much an instinctive call as anything; with the market in its current position, one thing that won't serve either bulls or bears is complacency. It's worth noting that I've observed some level of complacency on the bull side recently, so it will be interesting to see if the market chooses to address that in the near future. Since it's unlikely the market will hang around current levels for long, a clearer picture is likely to emerge quite soon. In the meantime, trade safe.

Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

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