Stock Market Staying Lateral Off The Big Move Up....

Stock-Markets / Stock Markets 2013 Jan 08, 2013 - 05:43 AM GMT

The market had a huge move a few days back when the fiscal cliff news was settled positively, the Republicans giving in to the news due to the fear of market conditions. They took a right cross as they swallowed the tax headaches in which they wanted no part. It was good news for the market, and we saw that with the huge move higher. We have spent the past three days moving laterally or consolidating that move. Good action technically as we are not seeing big volume come back in and take this down with any force. No head fake on the bull on the side of the move.

When markets move laterally, it's usually because they got overbought, which we did on a couple of the daily charts, especially on all the short-term 60-minute charts. Good action when there's not a lot of price erosion, and yet we're able to unwind those overbought oscillators back to neutral or close to neutral. There's no excuse if you can't get going back to the upside from there. We shall see in the days ahead, but the bulls, based on this action, really should be able to make new highs not too far down the road. It may be the last move up, but they should be able to do so. We'll watch closely, but the technicals say it shouldn't be long before some type of move is made with upside progress attached to it.

The market faces two big challenges the rest of this year. Either one of them could put the bull market to its death. First we will deal with the debt ceiling in which the Republicans have said they will make no more concessions. Since they did on the fiscal cliff, it's now up to the Democrats to give in on spending problems. If this isn't the case, and if the Democrats say no to that, the market will get crushed. No ands, ifs, or buts about it.

The market will get hit extremely hard. Beyond that, by years end, Mr. Bernanke has said it is more likely now that the QE programs will come to an end. No more free cash such as we've seen for years now. If the Fed Bernanke does pull the trigger, and/or the debt ceiling doesn't get solved, we could see some very large losses. As usual these days, there's a ton to worry about and have to deal with as time moves along through 12013. By February we'll deal with the debt ceiling headache, which needs to be resolved by March 1 st, I believe, and then all year, when the Fed minutes are announced, we'll be reminded about the QE programs that will probably going away by years end. Sounds like a barrel of laughs to me.

For now, stocks are simply moving lateral. The S&P 500 is closing in on a breakout over 1470. A strong clearance of that level would set up a move to the low and possibly even the mid 1500's. Apple Inc. (AAPL) is trying to put in some type of bottoming stick, but maybe we need to turn our focus away from it as it has been crushed, yet the Nasdaq has hung in there extremely well. Good news for sure on that front, but it can only help to have AAPL bottom out, even if it's just for a little while. Staying on the long side seems best since all of the daily patterns are bullish in nature.
I am watching 1470 on the S&P 500 for more insight.

Peace.

Jack

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.

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