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Levels and Issues


Today is another example of how this market is driven as much by psychology than it is by "levels" or "issues." Geo-political rhetoric heats up, oil breaks above $31/ barrel and retailers continue to show "at the low end" results. Isn't that the same type of news that drove the market down recently? While the market isn't surging, it isn't getting blasted either.

The reality in this game of perception is that any news item or level is only important for a few minutes as the market reacts and looks forward to the next thing. In a volatile market many times that becomes "technical levels."

Normally, as a technician, I would also give important support and resistance levels to go along with the direction of news and tape, but frankly, there aren't any. This is a tape that has been driven by psychology and emotion and when the various oscillators such as the stochastic get to extreme levels, they can become more important than support or resistance levels.

As I have been suggesting over recent days, the stochastics are reaching a rather extreme oversold level suggesting a solid possibility for an oversold bounce. I have also continued to indicate that the intermediate-term picture has lost momentum and as a result, I would only anticipate a bounce that, while allowing for some upside, may not be sustainable.

The market remains in the twilight zone and as a result, there may be times over the next couple of months where it looks like the market is about to crash and times where it looks like it could surge. Both could happen at different times in a developing range.

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