Bears look at the churning market price action over the past few days as a sign that we will eventually break lower. Bulls view it as part of the stabilization process. My position has been that I have no clue if we sink another 1-2% on the senior indices, or have already bottomed at 1430 on the S&P 500 last week. Instead, I am focused on individual stock selection, sector rotation, and the overarching uptrend the market is still in, judging by a variety of technical and sentiment factors.
The gains of each of the past two mornings have been erased, and the S&P is being pulled back in to its rising 20-day moving average as though that reference point were a magnet. Overall, it is easy to become frustrated with this type of action and throw your hands up in disgust. Of course, that is precisely how many traders get left behind during market uptrends–When price pulls in and churns, all the while the major averages have neatly lined up and rising moving averages.
Going forward, I am looking for a continued rotation into the financials and emerging markets. Select technology stocks look to be basing tightly as well, particularly AKAM and RAX.
My theory is the major daily MA’s have a magnetic effect because MM’s use them, so their activity increases when price is on them.
fair point
should read **
so MM activity increases when price is on the major MA’s.
1. Some momentum Hedge Fund who bought 30,000 ES on 9/25 had to sell out of the position and sent the market down, never to be retested.
2. The S&P cannot get off it’s Support line in it’s Symmetrical Consolidation, Bearish after a breakout IMO. Institutions who initiate buying programs at that level keep seeing selling from above and price rejection back where they bought it. In other words, no follow through with other Wall Street firms. You have to ask yourself, if you managed a billion dollar fund, assuming you know what you are doing, why would you be a buyer after the market just ran 200 points since June?