• As Toddo has mentioned a number of times, the very near-term picture shows a clear breakout for the S&P 500 (SPX) and Nasdaq Composite (NAZ) above the mid-March highs. This is not yet the case for the Dow Jones Industrial Average (DJIA).
• When you look at something other than the near-term picture, there is nothing but overhead resistance in all three major market indices. The problem with technical analysis is that someone who is trying to make a case can always find a price chart, oscillator or time frame to make his or her case. Since this is an educational site, I would like to offer out what the WHOLE picture looks like and then you can make your own decisions.
Despite very near-term breakout, the SPX is rapidly approaching some significant overhead resistance.
• I chose right now to focus on the daily and weekly overhead price and trendline resistance because my time frame isn't intraday movements. Is the move above the March highs important? Maybe for a little while, but at the end of the day, how you react to it should be based on your style. Traders who can be quick on the draw could buy for a move to 925-930 resistance, where investors would use a move to that level as an opportunity to cut back some exposure given the percentage move off the lows.
• When the market is down 5%-10% in the fourth year of decline, in-line earnings are a positive surprise After a 13.8% move off the low, I am not so sure that is the case, with today's futures indication being a solid example. Earnings were good, but despite technical breakout yesterday above very near-term resistance and solid earnings reports, why aren't futures higher?
• In my view, the SPY and QQQ have seen their day in the sun. They are likely to be trading vehicles for a long time, but in a longer-term, lower volatility market environment, traders and investors alike are going to have to go back to stock-picking as a way to obtain superior returns. At dinner last night with some really smart guys, the conversation surrounded that topic. The fundamentals and technicals agree here in my view. The "market" is likely to be mixed and choppy for some time to come. I am working identifying the proper tools to find where the sector rotation is going. These include money flow and relative strength.
• In a plus or minus 5% market, in order to get double-digit returns by trading market vehicles like SPY and QQQ, you have to be a nearly perfect market timer. I am sure there are some out there, but I know I am not one!!!
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