Nov

Market Nearing Critical Juncture – Is There a Dramatic Move On the Horizon?

Welcome Research Lab Members. Before we get to the big picture on the overall market I want to thank you for your support. We are a small community of like-minded speculators and traders and we share some of the best tools anywhere. Seriously, where else on the Internet will you see this?

NLST was a perfect example of why we created our real-time scanners. NLST popped in the widget on the second 15-minute bar today and was on your radar screen continually. What’s even better is the fact that the slow curve up to the breakout mid-afternoon offered plenty of time to get in. We only wish there were picks like this every day. Any trader know this is an anomaly but hey, it’s nice to see we are in the loop and on the cutting-edge.

If you are new to the Research Lab be sure to read back through the old blog posts, starting with the first post back in July of 2008 before the market tanked Stock Trading vs. Buy and Hold Investing.

The funny thing is that the text of that post almost applies at this juncture. No, we didn’t call the exact top but that post was fair warning to our members. What was said there applies today.

So the overall market is nearing an inflection point in my opinion, as it is approaching the apex of the triangle formed by the major trendlines.

In the next two weeks the S&P is going to break one direction or the other and that will set the stage for what could be a dramatic move. We will have to wait and see which way it goes before we will know the type of environment to expect going forward. The main point I wanted to make is that we need to be extra careful with our trades and positions next week.

There could be a fake-out move, a melt-up or a quick pullback to the bottom of the daily range. We could potentially squeeze further into the apex and prolong the anticipation for another week, but we want to be extra alert as we are definitely nearing crunch-time with this pattern.

Trendlines on the daily chart show the likely points of support and resistance.

There are a couple more lines that could be included but I wanted to keep it simple as possible. The main overhead resistance trend line begins at the all time market high in October 2007, and is the one to watch, however the market might stay in the current rising channel without doing anything dramatic after all. We would be most concerned if we see a break of the uptrend line drawn from the March lows followed by a break of the lower channel line. Until then it seems we are just zig zagging away.

A pullback next week is so obvious based on the pattern of the last few months that it will surprise me if it works out that easy. The market generally confounds the maximum number of people and as we have observed, logic and rationale seem to be a thing of the past.

Aside from the market being in a precarious situation overall, our system is still finding a few swing trades that seem to be working.

This is a good example of why the Trade Plans are so useful.

This is a great example of a break-out move where RURL took out the previous high and had a nice long-range move up. It hit the entry, Target 1 and target 2 all in one day. It’s a definite win now as the stop on any remaining shares is moved to the entry. Typically in this type of environment, where a significant pullback could occur at any moment, we suggest taking profits at Target 1. If we are fortunate enough to get a push to Target 2, it is imperative that additional profits are taken. Target 3 is obviously a home-run and we have seen a couple of these recently, however looking through this months Trade Plans you would have done very well settling for a modest Target 1 move.

We will be doing some live broadcasting in the Research Lab next week. It should be a lot of fun and we hope to see you there. Simply log into the Research Lab and click the top icon and the show page will open in a new tab. It will give us an opportunity to give new members the “nickel tour” as well as answer questions and discuss the various tools and how we use them.

See you there!