Stock Market Thin Range... Earnings Upon Us...

Stock-Markets / Stock Index Trading Oct 07, 2009 - 09:12 PM GMT

Best Financial Markets Analysis Article Often we explain why a market gets thin, meaning why it loses its volatility and trades in a narrow range. We have good support at 1044 with 20 resistance at 1060 or the bottom of that now often talked about gap. It's going to take something special, either positive or negative, for this market to make a move and open up things. It could be earnings folks. It should be earnings. We are at the precipice of another earnings season but this earnings season is not an ordinary one.

The market has moved up quite a bit and that gap top at 1080 said no mas. To get through we are going to need an excuse and that can only be CEO's saying things are getting better faster than we thought and they will need to raise earnings guidance for the next few quarters.

Now, there is a game these crafty CEO's play when things are bad and that's called let's lie through our teeth to ratchet down expectations for the next quarter and then let's come in and beat them handily, sending our stocks soaring higher.

If we don't see that then we know things are really much worse than any of us even thought they could be. That game of not being forthright is very popular throughout the past many decades. I mean why not. It takes the pressure off. If things don't improve the way they thought they would, then oh well, no one is surprised. If they can "surprise" then all the better.

So we're starting the earnings game tonight. Alcoa Inc. (AA) begins things in earnest but they're not a very important earner. It's about those banks and big cap technology stock. We get that game going on Tuesday with Intel Corp (INTC). Huge report and this will set the tome in my opinion. It just explodes from there thus the next few weeks will be very telling for this market and its future. Buckle up. It's fun time. 20 Anything is better, even if it's bearish, than sitting in this horrific tight range to nowhere. Let's get the volatility rocking back in. AA can start that to some small degree tonight.

We started lower this morning and then spent the rest of the day watching the S&P 500 and Nasdaq trade around the flat line while the weakest sector of them all, the Dow, lagged. The Dow is a meaningless index, but some folks ask about it thus I mention it, even though we must never consider it very relevant.

Everything is hording where they need to. We can't break above 1060 but notice how we're not falling very hard from that level whenever we get up there and fail. If the selling off that level was more intense, more impulsive, I'd be more concerned. Not that I don't have my guard up. I always do, but the action isn't screaming we're about to fall off the cliff, and even if we do, we have our key inflection points thus I won't overdo my welcome.

Today was more of a pause in front of the earnings season about to get rolling along, which I believe will be the catalyst to 20 breaking out or down above or below key resistance or support. We won't have to wait much longer as things set up.

The dollar tried to bounce some today but remains in a clear down trend in the current wedge. It has lost the sedge yet on either side so one could say all is possible but we're in a falling wedge thus the trend remains just that, lower. It's going to take something out there no one is aware of yet to clearly change the trend in this vehicle. The erosion has been steep and 20 amazingly, no one seems to want to step in and take this up.

Eosion hasn't led to interest and that too is very telling in many regards. The bottom fishers still haven't seen there is much worth catching here. The PowerShares DB US Dollar Index Bullish (UUP) remains the key chart to watch in terms of overall market movement. Until the trend changes, it gives the bulls hope we can get in to the 1060 to 1080 gap once again.

Look, it doesn't take a genius to see the technical's on the daily charts are mixed. Stochastic's lead the MACD. The stochastics always turn up firrst and they have turned up nicely no doubt on this latest move. The problem, although the MACD lags, it's really lagging this go around. It's really unusual to see such a strong stochastic that has already crossed fast line to slow line 20 positive and yet see such a nasty MACD.

It's hard to make sense of it and I can tell you with all sincerity that it's not something you witness all that frequently. Normally one follows the other in being reflexive or bearish or being impulsive or bullish. It remains a market on a buy signal until the bears can kiss those 50-day exponential moving averages good bye in their rear view mirrors. Just play what price is telling us to and as long as the stochastic holds up, the market has a shot of further upside although no 20 guarantee.

Let's just go over support and resistance once again. The 50-day exponential moving average on the S&P 500 60-minute chart, that's the 60-minute 20 chart, is 1048. The 20-day exponential moving average on the daily is 1045 now thus there's strong support between 1045/1048 on the S&P 500.

The Nasdaq has its 50-day exponential moving average on the 60-minute chart at 2094 while the 20-day exponential moving average on the daily chart is at 2087. Strong support 20 therefore between 2087/2094 on the Nasdaq. Resistance is clear 1060 and then 1080 on the S&P 500 and that's where we need to keep our focus for the entire market in general.

Slow and easy as always.

Peace
Jack Steiman

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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