Breakout or a Failure, or a Test and Pause?

Through the mist of uncertainty overhanging the upcoming Fed meeting and the elections, the gorillas stepped up to the plate Monday morning, levitating the S&P above 909 like some hyperventilating Faye Ray. However, in the last hour, the bears weren't shooting blanks.

The S&P swung through 909 like Tarzan after Jane -- Jane being the tail from Sept. 11. But it was a well-greased vine, as the S&P slipped back after tagging the resistance at the master square at 924 (see Square of Nine chart. In doing so, the S&P made a round trip, leaving the day looking more like the Matterhorn than a breakout.

I assumed the S&P may pay some respect to this so-called master harmonic at 924. But after a triple-top breakout on the point-and-figure chart of the percentage over 200 (the number of stocks above their 200-day moving average) from 22% to 25% on Friday, Monday's action was strange to say the least.

Nevertheless, since when did the market ever make it easy for us? The shorts, and there are some prominent bears with short positions still out there all the way from the lows, simply got tossed from the horns of one dilemma to the other on Monday.

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If they chased to cover this morning, now what do they do? If they stayed short, the fact remains that although we tailed off today, the S&P still broke out, as did the percentage over 200 on the point-and-figure basis. Again, they never make it easy. But in my experience, the market enjoys doing what it has to do to keep as many traders as possible off balance and on their heels.

As you recall, I mentioned that Monday was an important turning point for some of the cycle boys, and that it can just as easily be an acceleration or a near-term high. So the question remains: Was Monday a breakout or a failure, or just a test and a pause as the S&P tagged its September highs?

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Jeff Cooper is the creator of the Hit and Run Methodology and the author of the best-selling books Hit and Run Trading (The Short-Term Stock Traders' Bible), Hit and Run II (Capturing Explosive Short-Term Moves in Stocks), as well as a video course, Jeff Cooper on Dominating the Day Trading Market. He also created the Hit and Run Nightly Reports and co-founded a trading markets Internet site. Click here for information about Cooper's email newsletter, The Trading Reports. At time of publication, Cooper held no positions in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Cooper cannot provide investment advice or recommendations, he welcomes your feedback. If you are interested in information regarding the Money-Flow Timing Model, please visit www.mutualmoneyflow.com

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