Major averages closed nearly flat yesterday on lower volume that was well below average. The majors made big advances over the last few days, so yesterday's action can be considered a constructive digestion of the recent gains. Nevertheless, we remain in a period of elevated volatility.
Before this year, the S&P 500 has never traded so flat and chaotic in its entire 48-year history. The last time the S&P 500 was this flat was in 1993, but that pattern was coherent so money could easily be made that year. The battle between quantitative easing and a sick economy that refuses to jump start is evident in this year’s chart pattern. Fortunately, such anomalies always come to an end as external manipulation of the same type in the same manner has a limited shelf life. The only thing that doesn’t change is change. So always expect markets and conditions to change.
That said, the S&P 500 chart pattern that has emerged this year is perhaps telling us that we are reaching an important tipping point. Unless the Fed starts up QE4, or unless the US economy really does start to improve which, in turn, helps the global economy, this sideways pattern could be expressing an important top. We will be discussing this further in today's webinar.
But rather than try to predict markets, stay in the present by calmly taking action as needed as new information by way of price/volume action in leading stocks and major averages presents itself.
Short-sale targets Tesla Motors (TSLA) and Apple (AAPL) have rallied with the market. AAPL was bolstered by a buy recommendation from Goldman Sachs which pushed the stock through its 50-day moving average. However, the stock found resistance at the top of its prior gap-down "falling window" of November 10th and the 120 price level. We would view this as a potential short-sale point up to the 200-day moving average at 121.96, using the 200-day line as a guide for an upside stop. TSLA ran into resistance near its 10-week moving average, and we would consider it shortable as close to the 10-week line at 229.02 as possible, using the 200-day moving average at 233.13 as a maximum upside stop. These would be optimally actionable if the general market were to tip back to the downside.