This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

How to Trade a Market That Takes No Prisoners

NEW YORK (TheStreet) -- A few weeks ago I wrote "This Is Not Your 2013 Snapback Market Anymore," and I could probably just copy and paste it here, since not that much has changed. High-growth momentum stocks are still getting crushed, utilities are still outperforming and the S&P 500 isn't selling off in the same manner as the iShares Russell 2000  (IWM) and PowerShares  (QQQ), which tracks the Nasdaq 100 index -- yet.

What's new is that several high-growth companies, such as Netflix (NFLX), Facebook (FB) and ServiceNow (NOW), have reported earnings that beat the Street's estimates, but their shares sold off hard. That should not be taken lightly.

This market is not acting healthy by any means.

If the market is unhealthy, then shouldn't you just short everything? It would be great if it were that easy. If you are a trader, you already know that without impeccable timing, trying to short stocks in a bull market can be disheartening and destroy your confidence.

Oversold bounces and the choppy nature of this market will destroy traders who aren't nimble and risk-averse. This week's heavy economic calendar, the Federal Reserve policy meeting and more earnings releases will provide catalysts to challenge even the most seasoned traders.

Levels to Watch: The S&P 500 failed to make a higher high and is now sitting near a convergence of the 10-, 20- and 50-day moving averages. The 10- and 20-day moving averages are both near the 1852 level, which will be the first place to look for support going into this week. After that is 1834 and then the previous low of 1814 made on April 11. If the S&P 500 goes lower than that, it's quite likely that it will drop to less than 1800. Levels of resistance to the upside are 1872, 1884 and 1897.

As I have written for several weeks, the S&P 500 should pay a visit to the 200-day MA in the near term. With the recent churning, the 200-day MA is now only 5% away. Whereas in previous weeks I assumed the markets would be facing a sudden, large correction, I have become open to the possibility that the markets may instead remain choppy as prices correct gradually, digesting the gains of the five-year bull market that began in 2009.

At the end of the week before last, when the market closed with strength following a large bounce, I wrote that I didn't believe it would make another V-shape reversal to new highs and that "perhaps in fact this time is different." As you can see above (and now below with the Nasdaq 100 and Russell 2000), this is so far proving to be the case.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs