Stock Market Hesitation At Resistance...Some Doij's....
Stock-Markets / Stock Index Trading Nov 12, 2009 - 01:14 AM GMTBy: Jack_Steiman
Doji's today, which mean an equal number of sellers to buyers, once we gapped up early on says, there could be a pause in the bullish action over the next day or so. It doesn't have to take place, but be prepared for that possibility. It says the possibility is made more real by the fact that we're at some really tough longer-term resistance at 1101 S&P 500. That doesn't mean individual stocks can't be owned. It simply tells us that having too much exposure, say 50% or more right here, makes little sense, and you have to own the best of each sector if you do own stocks. Own stocks that have unwound or have gaps underneath them so there's strong support.
Doji's do not mean the pause is long lasting. It can be, but in a strong trend such as we're in now, they can be very short term in nature. You don't want to be bearish here just because they printed, because the overall trend is higher and there have been other times when we had these doji's and they simply did not work. Again, they have a better shot simply because of the location being so close to resistance at S&P 500, but there's no guarantee they will work, thus some exposure to a stock or two makes sense in case the market decides to keep running.
What I am finding more interesting than anything else these days, is the fact that so many seem to want to be bearish. I have my ear out there and I speak with many. I watch the web sites. There is a prevailing view that this market has to get smoked some time soon thus people are shorting, or simply selling their plays from weeks ago, if not months, and now are simply hoping the market falls because of what they've missed. In some cases, I know of folks crushed by being short these past weeks and months. So there is a lot of hope for a major correction out there and this negativity is helping to keep this market moving higher in the face of economic problems. Always remember folks that fear is stronger than greed. The fear of another bear leg down is keeping folks bearish enough to keep a bid under this market. It doesn't mean up every day. It simply means the trend continues onward for now. That trend is clearly higher overall.
The market continues to put more space between it and those support levels that matter the most, the 50-day exponential moving averages. As long as we're trading above those levels, and we are quite easily at this moment, the market is going to want higher on pullbacks. Not only that, but we are now seeing some bullish MACD crosses on leadership stocks and indexes take place on those daily charts, and this too keeps things more bullish. If the MACD crosses were taking place at elevated levels. I would be far less optimistic about things. However, they are taking place from low levels on the MACD cycle, and this says that sustained down side won't be easy by any means. Down yes, but sustained longer term, no. Stocks like Goldman Sachs Group (GS) have MACD 's making a bullish cross from below the 0 line with gaps underneath. These types of stocks can pull back a few dollars, but getting sustained selling won't be easy. Most of the stock market heavyweights have set ups such as that.
See today's charts at Swing Trade Online: COMP (Nasdaq Daily), INDU (Dow Daily), SPX (S&P 500 Daily), SOX (Semiconductor 5 Year Weekly), TRAN (Transport Daily).
With sentiment bearish already, it takes just a little bit of selling to ramp the bearish froth even higher. That's the way it is and with those 60's already unwinding, it won't take long for many great set ups to take shape thus be ready for that. Strong markets do not stay oversold on the short-term time frame charts for very long. Use weakness to enter good plays and don't be afraid. Only fear comes when we lose the 50-day exponential moving averages on the major index charts.
When opportunity knocks here, take advantage. There are now many gaps on the indexes as well, thus oversold and at gap support makes a nice combination to buy when everyone thinks doom is dead ahead.
Stay smart. Play lightly right here. Let opportunity present itself over time.
Peace
Jack
Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.
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