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Monday March 19th 2012
by Jack Steiman www.SwingTradeOnline.com
It seems to me, based on the volume trends I'm seeing, that the majority of folks are waiting on a big pullback to occur first before getting back into the market. Or, they may be waiting to get into the market for the first time, because they've missed the entire rally off the lows. It's that waiting attitude, and low bull-bear spread, that gives me real hope that the market will hang in there a bit longer than most expect, or the pullback won't be nearly as hard, or severe, as the masses think. But they’re still missing the rally as they will wait too long once the selling begins, thinking it will get worse.
It's when everyone loves the market that I get real nervous. That’s because of what I’m hearing, and what I’m seeing, regarding those sentiment numbers. I don't think the market has to worry about complacency any time soon, although, we all know that someday it will, indeed, be an issue again, or at least the bulls hope so as it would take a lot more upside from here to get this market overly happy with joy. As long as the market is hanging in there, let the waiters wait some more. If they wait, we know things are alright.
There are quite a few reports on the economy out again this week. It's a seemingly endless array of reports day after day, and week after week. Maybe the masses are waiting for the reports to start eroding in the hope that the market will fall, but, thus far, the majority of these reports are coming in as, or better than, expected. Markets move based on future earnings reports. An improving economy implies a better environment for earnings, and thus, the market continues to hold on from this stand point. There's Fed Bernanke and his work, which is a major reason, as well, as to why we are holding up so well. The fact that the economic reports keep coming in so decently is helping tremendously with regards to keeping a bid under this market. Another interesting week is ahead. We'll see just what the reports have to offer. Only if we get a repeated number of bad reports can we, then, expect the market to start giving up its gains.
It’s hard to believe that the earnings season is right around the corner. Now is an interesting time, because we’ll get to see if there are any pre-earnings warnings. If it stays quiet, that means the CEO's of the world have done a good job at two things. The first one is to have lowered their guidance so as to not expect things to be too good. Secondly, it is to have actually grown their businesses in a way that they will be able to not only beat the expectations, but far more importantly, is to have raised guidance looking forward, something the market loves. It says there's still good news out there for the future of that stock, and the stock market in general. The time for any warnings is about now. We will surely hear about some, but the key is to keep them to a minimum, and away from the leading stocks of the world in all of the key sectors. If things stay quiet, then we should have a very nice season on the earnings front, which can only help stocks move higher over time.
We still haven't blown away from S&P 500 1410, and thus, it remains resistance, but 1400, now down to 1370, is solid support, especially 1370, since the bulls have been able to put some distance away from that critical level. 1440, or a bit higher, is next resistance, if we draw away from 1410 over time. The market is still vulnerable to a pullback, as always, at any time, so don't be shocked if it takes place now. It doesn't have to, and the key is to find good stocks in good patterns and bases, and to trust them over time. Never a guarantee, but that's all you can do in this environment. If you struggle with having stocks pull back from overbought, then you should be playing less, but, if you can handle the whipsaw, simply buy as I stated just above.
Keep it simple, one day at a time.