Jack Steiman, www.SwingTradeOnline.com, on the Market's Healthy Consolidation
Jack SteimanWe may undergo a consolidation period here, which is fine. If it takes those oscillators down with little in the way of price erosion, then it's all good. I would expect 875 SPX to hold firm on any further selling before trying to move higher once again.
You want to watch how losers pull back and respond once they get to their big levels of support. We are seeing lots of triangles set up, which is usually bullish when the previous trend was to the upside. The triangles allow the stocks to trade within a narrow range, mostly a bit lower, and then allow them to break out all over again. You can see many stocks and sectors already beginning their process towards testing breakouts or moving back to test their 50 day moving averages and or gaps. The volume is already coming down as we head towards those levels. If volume was increasing as they tested then you'd have a clear red flag to worry about. But for now, after today's selling, we are seeing exactly what you'd want to see if you still hold a near-term bullish stance, as I do. The leaders that have led this rally across many sectors of this market still are set up in bullish patterns. The key is buying them on weakness and not being afraid to do so when a certain amount of selling has just taken place and is now playing with your emotions. They are setting up and soon will be buys.
Mike Paulenoff, www.MPTrader.com, on Why Bailing on the Long Side
Mike Paulenoff Although Monday's weakness could not be reversed by the bulls (which to me represented a definite change in intraday profile), the selling "pressure" in and of itself did NOT inflict any meaningful damage to the nearest-term uptrend. So why did I get out of our long model portfolio positions in the Q's and the GDX (+14% profit)? My theory is that when this market decides to take back some of its 40%+ gains, my sense is that it will be a vicious and extremely treacherous BIG gap down situation - that will occur in overnight trading. To go home long "up here," I need my work to imbue me with much more confidence than it exhibited at Monday's close.
Lacking that confidence, I bailed out of the long side and headed for the safety of the sidelines to see what develops in the upcoming hours. The enclosed hourly chart shows the precarious juxtaposition of the S&P 500 emini futures with nearest-term support at 905.50, which if violated should trigger the first phase of long liquidation. Should a disorderly, ugly decline materialize overnight, the e-SPM could plunge from 908 to beneath the lower channel support line, now at 871.75, which certainly will trigger some panic liquidation. Having said that, however, I do not have salient enough sell signals at this juncture to preclude yet another loop up into new high ground in the vicinity of 940-950. With all of the foregoing in mind, I thought it best to step aside and to get my bearings during the upcoming hours.
Gary Dean, www.MarketsPath.com, on Why The Top May Be In
Gary DeanMost have their eyes set on the 200 dma as an upside target for this leg up. With so many eying the same 940-950 level, I would think that we aren't getting up there.
With the sentiment levels at extremes (85% bullish sentiment) I am leaning on the side that we don't get up there and the top is in for this leg up.
A break of 901 spx would be our earliest tell that the top is set for this leg up with a move under 890 increasing the odds and 880 would stamp it complete. If any of these pivots hold and the bulls step in again, it would leave the door open for a move up to the 940 level. I believe the 880 level will be in play, as the spx futures just broke through a triangle to the downside, with a target of 870ish.
