The market loves to fake the masses.
With the Dow closing decently below the 50-day exponential moving average on Friday, with the S&P 500 testing it, and with the small caps also closing well below the 50s, it seemed as if the bears had finally seen their time arrive.
Most folks believed that today we'd see a big gap down, and run lower all day as the bears finally took control of this stubborn market.
The bears also had some nice hope once the futures opened for trading last night. A nice gap lower looked to be in the cards, but by the time the market opened for action this morning, those thoughts of joy had fallen away as the futures were green. Barely green, but green, and, thus, no big gap down and run as they hoped for.
Once we opened, the bears gave way and allowed the market to move slowly, but gradually higher. Another lost opportunity for the bears just when it seemed all was in their favor. The first close below the 50s on most of the indexes bought out the bears across the board.
It's hard to blame them, to be honest. The bulls had easily fought off the bears whenever it even got close to the 50s after we blasted off the bottom at the very end of January. Months of solid behavior was going away. Or so it seemed. Not the case, when all was said and done.
The bulls kept their side of the story in TransAct Technologies Incorporated (NASDAQ:TACT), although they too have much to prove since they haven't been able to do much either this year. In fact, the Nasdaq is still down roughly 5% for the year with the S&P 500 up a drop.
The market for 2016, and most of 2014, has been about creating false hope for both sides, which naturally creates bad trading, since folks get emotional when they see something they believe will lead to the next step. It just isn't working out chasing weakness lower, nor is it wise to chase strength higher.
Sad thing is there doesn't seem to be an end to this back and forth to nowhere market. We can hope we get a directional move, but it's not happening for now. Someday, of course, but not now. Adjust your trading accordingly.
When markets are in apparent trouble it's often because leaders, or a certain leader, is in trouble. Heading into a bear market, and, thus, it tends to bring the rest of the market down with it.
The very heavily weighted Nasdaq stock, Apple Inc. (NASDAQ:AAPL), broke down badly below trend-line support at 92.00 last week. It went to the 89s before closing a bit over 90.00. A broken stock that also gave the bears hope things were changing.
If AAPL were to continue broken it would surely put pressure on the rest of the market. Then the news came out over the weekend that Warren Buffet has been buying the stock, and when he buys a stock, that's news, right or wrong.
Well, we found out his purchases have been quite poor with an average buy at 109.00. That didn't matter to the bulls. He's buying, and, thus, all is well, which allowed AAPL to close back above the lost 92.00 level today. What a save for the stock and the market.
Buffet to the rescue, even though he's been dead wrong on his purchases. Remember, the market is about perception and rarely the truth. He's buying, so even though things are bad at AAPL, now they're good. Just like that.
We'll see if this holds above 92.00 again as the days move along, but for today it was the medicine to help it recover back over lost critical support that had turned to resistance. AAPL, of all stocks, to the rescue today.
Look folks, in the end it's about whether the S&P 500 can hold above the 200-day exponential moving average at 2023. This is important, because as of now the Nasdaq has lost its lowest moving average or the 200-day, and, if the S&P 500 were to join in with that type of behavior, the bears would be golden.
The Nasdaq is trying to move high enough to back test the lost 200-day exponential moving average. The S&P 500 is trying to hold it from above and needs to do so to keep the market from truly breaking down.
There is strong horizontal resistance at S&P 500 2085 with the 200-day at 2023 being important support. So now we follow that 3% range (2023-2085) and see which one breaks first, which should allow for a more directional move over time.
In between it's all noise, so be careful getting overly aggressive.