Flow with whatever may happen and let your mind be free. Stay centered by accepting whatever you are doing. This is the ultimate.
-- Chuang Tzu
The best investment results are obtained when you are intellectually and emotionally in tune with the market action. You will rack up your biggest gains when you understand and embrace the price action that is occurring in front of you.
The trick is that the market action is often not very clear. When there is little edge in the market, you need to understand and embrace that fact as well. That's when you will need to be patient and wait for things to develop before you can be more aggressive with your trading.
Current market conditions are quite murky and strongly suggest that we wait for things to develop more fully. The bulls have been trying for about three weeks now to turn this market back up but have been turned back three times as they tried to move through key resistance at the 200-day simple moving average of the
, which is around 1108.
While it is a positive that we are holding well above the recent lows at 1050 or so, it is a negative that we have not had better momentum to pop us through key resistance. The late-day failure yesterday after news of a downgrade of Greek debt is that exactly the sort of action you expect to see in a poor market. The bulls were given a good opportunity to push higher but just couldn't muster the buying power to do so.
After the action yesterday, we are back in the three-week-long trading range. We are still at the upper levels of the range and the bulls are showing a little early interest but the path of least resistance is to the lower boundary of the range.
We need to watch for this market to resolve the recent trading range and then to embrace the action as conditions change. In the meantime, we might want to do some short-term trades within the trading range, but until a larger trend emerges it is quite difficult to build longer-term positions.
I'm staying very open-minded about the way in which this trading range will resolve, but the bigger picture is not very positive. We all know that the news flow isn't very good, but it is the technical picture that is of major concern. We broke down badly in May and have been trying to turn up for three weeks now with limited success. The bulls are using up a lot of bullets in their battle to develop an uptrend, and the lack of volume makes it clear that they are lacking firepower.
Should we take out 1108 of the S&P 500, that is likely to trigger some technical buying and short-covering, but we start running into more overhead resistance quite quickly once again. It is going to take some good news and better sentiment to put this market on a solid upward trajectory.
We have a slight gap up to start the morning. Good bond auctions in Europe are helping the tone and the euro and oil are showing some strength. We'll see how well the early strength holds but this market is not going to give us much clarity right away.
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James "Rev Shark" DePorre is the author of
Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market
. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates
sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback;