The major indices have moved sideways for several weeks now. This is making life a little difficult as it does tend to have an attrition effect on our trading. This is simply because of the up and down whipsawing nature of a sideways moving market which creates an higher incidence losing trades as protective stops are hit.
So we ask ourselves, should we be in this market at all? Would it not be more sensible just to sit this period out on the sidelines and wait for a more positive directional trend to set in?And we answer ourselves by again analysing the trending signals being given by each market index and, again, coming to the conclusion that we should stay in and keep trading.
The main point being that although the risk of a downside move is increasing slightly by the week as the indices fail to make upward progress the fact is that the indices are holding their own, moving sideways, within the overall dominant Uptrend. The very fact that it is an Uptrend indicates that higher prices should continue – even though there will be price consolidations and corrections from time to time.
So, we worry and fret that the next bit of bad news could cause a tumble in share prices but we remain true to the faith that the dominant trend will assert itself and, whilst it is an Uptrend, take share prices higher at some point. Any tumble could be relatively short lived anyway as all of the major indices have potential support levels not far below current prices.
It is an important part of the decision to stay invested and investing that, after such a relatively long time going sideways, the markets are much more likely to pole-vault upwards once they do start to move. The crucial level is, as we have repeated for several weeks now, the 1122 level on the S&P 500. If that is broken to the upside then just watch (and, if invested, enjoy) the resulting rush upwards in share prices in London as well as on Wall Street.
To shorthand the individual stock market reviews here is our view of the potential prices that the markets could move up to, together with the first levels of potential support in the event of a ‘bad news’ reaction –
Market last week potential level support level
when Uptrend reasserts if market falls
————— ——————— ——————————- ———————
FTSE 100 Weak. No progress for 8 wks 5770 5108 (then 4670)
FTSE 250 Weak. No progress for 12 wks 10600 8888 (then 7980)
FTSE SmCap Weak. Becoming endemic 2910 (then 3230) 2425
S&P 500 Stalled at resistance level (1111/1122) 1290 1000 (then 940)
DJIA Pushing upwards 10785 (then 11800) 9705 (if 10333 fails)
NASD 100 Stalled. 5 wks sideways 1827 (then 2040) 1740 ( then 1629)
Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/
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