I'd anticipated a snapback off the 10% down-move on the S&P 500, with a retrace to around the gap at 1928, or thereabouts. Thus far, the market is playing out as expected. Of course, we could go somewhat higher or lower than my target. It's just that you have the confluence of gap, moving average, and a 50% retrace, all coming together at that approximate level.
When a market wants to do something, it's very hard to deny it. For instance, there was absolutely terrible news from market and economic leader International Business Machines Corporation (IBM). They actually paid someone else $1.5 billion just to take their semiconductor business off their hands. The stock was absolutely crushed, yet only the Dow was affected in an adverse way relative to all the other major indexes. A week ago this news would have totally crushed the indexes across the board. IBM had every chance to destroy the rally off the lows, and it couldn't do it, so it shows this is really a ridiculous game. News one day can crush a market, while the same news a day or two different can cause the market to laugh it off. It's about recognizing where you're at in the maze.
For now, the market continues its countertrend move off the S&P 500 1820 lows, with my target remaining around 1928. Nothing is guaranteed, and the market will need Apple Inc. (AAPL) to help out this evening. We shall see what they bring to the table.
Remember that the market can fool you in a heartbeat. When you think one thing is destined to happen it can throw you off course in a moment's time. Never think only one way. Learn to adapt and adjust as you go along day to day. While it's my belief we'll see 1928 to 1949 on this move -- closer to 1928, but 1949 is the 50-day exponential moving average, and that is never out of play -- the market doesn't have to get there. There are no rules. Just your best judgment based on what's presented to you on those charts. Also, it's not impossible that the market keeps going higher than we think simply because that, too, would be very unexpected.
If we get to the 20's, gap or 50's, you'll need to see a strong reversal stick before thinking about taking on anything to the short side. There are so many unknowns such as what may happen from the Fed out of no where, because Yellen panics based on price action. Never think you're that smart or above the game. Don't get emotionally tied in to only one thought process. That's how the majority get burned.
If and when I see the proper topping stick I will strongly consider shorting an ETF. Never a stock. Only an ETF. That all said, we see what AAPL brings to the table later this evening and how the market reacts to it. Keep an open mind at all times.
Jack Steiman
