I’m running on market fumes… Over the weekend I saw the futures jump higher and spent much of the past day and a half trying to figure out how to play the market. Now, I understand that stock trading is a personal thing and that everyone has their own style and timeline, but for the life of me, I couldn’t find any short term setups that I liked. The market is in bounce mode, but buying stocks after a 3 percent gap higher has never been my style. In fact, that’s usually when I’m selling. So let’s break it down. On the one hand, the S&P 500 is oversold and on bar 8 of a DeMark buy set up, that may or may not be complete. But that’s beside the point, the market was overdue for a bounce, and either way, it would be a sign of the markets current or pending need for a bounce. On the other hand, we have news/rumors of European bailouts to contend with; bailouts cause great disturbances in sentiment and volatility. They also change investor expectations, which, in turn, can cause large overnight gaps. For me, that’s like playing the lottery — and definitely not my style. Note also that fast upmoves (lasting 3 to 4 days) often occur in “bear” markets and reak of rumors and short covering.
So I’m taking it easy, looking for more good risk/reward setups, as well as a healthier market to emerge. I’ll be watching how the DeMark set up plays out and focusing on key support/resistance levels, with the 50 day moving average and 1225ish as overhead resistance, and the newly minted gap “air pocket” underneath as limited support. As of right now, the only price support that looks interesting is 1184, as a pivot higher could produce a measured move to 1223 (50% of annual high and low).
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