Reply #1: Market Observation [View All]

Where to Look Next
BY QUINT TATRO

When I had the honor of appearing on Financial Sense NewsHour with Jim Puplava the S&P 500 was sitting at the critical level of 870 and my comment was rather Swiss in nature in that I was truly unbiased and ready for anything. The push lower, breaking the now famous ‘neckline’ seemed almost too easy, however a jolt higher off a bearish pattern also didn’t seem prudent to anticipate. Rather than become biased towards any one side I chose to sit it out and wait. Now that the move has been resolved, I am ready to attack and position accordingly. I truly believe that this unbiased and flexible nature of trading is the individual’s strongest suit, however at this juncture I see far too many people still fighting a move that has already happened. They refuse to embrace what is, and are ultimately imposing their beliefs on a tape that could truly care less. The sooner individuals stop thinking about the bear side or the bull side and start focusing on the right side, the better off they will be.

Now that we’ve run over 15% in just a few short weeks it’s important to take a look at where we are and where we could go. As you can see in the S&P weekly chart noted below. The index is distancing itself from the 50 period moving average. This has been a key level historically and worth keeping an eye on. I would prefer to see a kiss of this area on a retracement, which would give investors a buying opportunity should this moving average be broken to the downside. It would be a cue to start taking steps back towards the cash bunker.

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The problem that many are pointing to in this tape is a lack of credible earnings. Let’s face it, expectations are unbelievably low and after cutting costs down to the bare essentials, it hasn’t been tough for companies to post what on the surface look to be exceptional numbers. A sustained uptrend in a market is not led by massaged earnings and whether I rely on technicals as my primary guide or not, I must at least be aware of the fundamental issues at hand.

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