S&P Eyes 200-Day Average on Descent
The market's conundrum and wall of resistance has been the 1180 level on the
S&P 500
.
Yet again on Tuesday, the S&P rallied and failed. An early rally toward 1180 -- 1179.40 specifically -- gave way and this time the index gave up the ghost, with almost everything buckling -- particularly anything related to cyclicals.
For example,
Nucor
(NUE) - Get Report
was down $3.95 and
Caterpillar
(CAT) - Get Report
was down $4.42.
Air pockets in stocks just off their highs, such as
NCR
(NCR) - Get Report
and
J2 Global Communications
(JCOM) - Get Report
, underscore the jitteriness and underlying urgency to sell.
Moreover, the strong housing and energy sectors look like their pullbacks are turning out to be something more than just pullbacks in a strong uptrend. They are displaying that more profit-taking is in store.
The potential plunge we anticipated into the end of March continues. And the market remains vulnerable.
Specifically, we stated that a break of 1170 on Tuesday should generate a quick move to 1160. On Tuesday, the S&P dropped down to 1163.70, tagging the significant swing high from a year ago March 2004.
It is important to remember that 1157 is 180 degrees down in price from our 1225 target, which turned out to be the high that was scored just 15 trading sessions ago. A convincing break of 1157 projects to 1123. Another 90 degrees down, or 1089, equates to 360 degrees down from the 1225 high.
But first the 200-day moving average on the S&P, now at 1151, comes into play before the notion of lower prices can become a reality. And, the bulls likely will pull out all the stops to support the 200-day moving average.
With the S&P now matching in time the 15-trading day decline that occurred in January, the idea of a double bottom at the January low of 1163 may play out. However, the current correction has overbalanced in price the January correction.
Consequently, it is important not to buy weakness but only strength, as institutional window-undressing continues. This is unusual seasonable behavior, which demands us to be risk-averse. Don't turn your back, protect yourself, as Clint Eastwood put it in
Million Dollar Baby
.
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.
Mr. Cooper is also a principal at Mutual MoneyFlow Management, a money management firm that is a registered investment adviser. MMM and its affiliates may, from time to time, have long or short positions in and/or buy or sell the securities or derivatives thereof, of companies mentioned in Mr. Cooper's columns. In such event, appropriate disclosure will be made. None of the information contained in Mr. Cooper's columns constitutes a recommendation by Mr. Cooper that any particular security, portfolio of securities, transaction or investment or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. While Mr. Cooper cannot provide personalized investment advice or recommendations, he welcomes your feedback at
jeff.cooper@thestreet.com.
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