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Market Driving Us All Nuts...

Jack Steiman from SwingTradeOnline.com at 11/17/09


You don't want to short a market in a confirmed up trend. At least not very often. I mean, why go against the trend in place. For the most part, this will just bring about bad results. 
On the other hand, as we trade closer to the top of the range, the market doesn't seem to want to explode up and out either. You do have to hand it to the bulls overall though. Even though they can't seem to break away from S&P 500 1100, they are keeping the pressure on the bears seemingly day after day. Like a boxer who doesn't have the power to knock out his opponent but who wins the fight by jabbing his opponent in to submission. 

Pullbacks are shorter and shorter in duration as time moves on. Higher highs. Higher lows. Yet somehow we keep finding ourselves very close to S&P 500 1100. With today's overall upside action, we find the market at a juncture of no return. It's time blast or time for a larger pullback. Although we can sell off at any time to unwind things, the bears need to get moving now or they will find themselves covering more short positions all over again. So here we are. Close to, yet another breakout, and with the market telling me not to short, even though there seems to be reasons to do so, being so close to major resistance. Interesting times indeed.

When you look at the market from a purely fundamental perspective, I can admit to all of you that there's very little reason to be involved on the bullish side of things. I mean, come on here. The New York State manufacturing report this morning was nothing short of a total disaster. A massive decline down month over month. The kind of number that could have destroyed this market today if things were behaving normally. Retail sales weren't very good either. While the news did hit the futures some, they held on to most of their gains, and once the market opened, things went higher still. That's the fundamental story. 

The market doesn't seem to care what that story is telling. Not for now. Why, you ask? Two reasons. The market is looking out far ahead and seeing a fed that won't raise rates for an extremely long time, even though you're all hearing rumors to the contrary. They will stay near, or at zero, for maybe a year or longer. In addition, the market, looking out ahead, seems to see things we don't at this point. That things will be better than we think. Our job isn't to argue with what we see. Our job is to play what we see, and for now, that message remains to be long or to be cash, but not to be short. 

The story seems to be, more than anything else, the total collapse going on almost daily with the dollar (UUP). Breaking major support today and having a very hard time even bouncing from oversold levels. No one seems to want to touch it and when a vehicle is broken such as this, few want to stand in the way of it.

As the dollar collapses, commodity stocks are moving higher. Commodity prices globally are shooting higher. Gold (GLD) is surging. The market is behaving well overall and confounding the "experts" such as Meredith Whitney, who have been short and wrong for quite some time, and come on CNBC daily shouting their case of how the market just isn't getting it right. The market is moving almost perfectly in inverse fashion to the dollar, so until that piece of paper can get a reversal, you have to feel the market is going to continue to frustrate the masses, even the very best of over paid "experts".

Strong longer-term support remains at those 50-day exponential moving averages well below the closing prices tonight across all the major indexes. Until the bears can convincingly close this market below those levels, you have to take every selling opportunity as a buying one. Recently we had closes below on the S&P 500 and Nasdaq, but not on the Dow.

See all of today’s charts below: SPX (S&P 500 Daily), SPY (S&P 500 SPDRs Daily), COMP (Nasdaq Daily), WTIC (Oil Continuous Contract), DBA (PowerShares DB Agriculture).

Not only that, the S&P 500 closed slightly below, but there was no follow through, thus within a few days the S&P 500 blasted back over once the bears saw they couldn't bring things down further, as a true breakdown would indicate under normal circumstances.
Strange times, but that's the way we have to look at things. It's lose the 50-day exponential moving averages on all the major indexes or bust for the bears. I, by no means, am saying that won't or can't happen. It can. I am not trying to chide the bears. I'm not! I am simply reporting what is taking place and what we have to look towards to play appropriately. The message still seems to be that above the 50's things are in good shape.

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