How do we keep ending back at the same spot?
Is it a good sign or a bad sign to revisit 4,200 on the S&P 500, over and over again? We've been doing it since mid-April so an optimist would say we're consolidating for a move up but a pessimist would say we've been to the mountaintop and we're paying market multiples that can only be justified in the promised land – but we may not get to the promised land and, right now, we're paying a lot of money for a stock market dream.
Since we have been up here for almost 50 days, however, the 50-day moving average has been dragged up to meet us – all the way to 4,121 at the moment but the 200-day moving average remembers where we've been – and that's way down at 3,748 – more than 10% below where we are now. The problem is, if the 50 dma rises to 4,200 and then we can't move any higher – we will slip below it and fall into that very wide gap with no support until we hit that 200 dma.
So that's what we'll watch out for but, as long as we stay over the 50 dma – we're in good shape and it will take an 80-point (2%) drop to get there – not likely to happen in a single session so we're still basically bullish – though not foolish enough to pay promised land prices for new positions, right?
We'll have a look at the Fed's Beige Book this afternoon during our Live Trading Webinar with Bill Olsen of Newsware and you can join us HERE at 1pm, EST, where we'll show you how to use the news to make profits in the market.
We caught a nice $1,000 per contract drop on Oil (/CL) yesterday and that was a news-based trade we discussed in yesterday's Morning Report and this morning we have a chance to re-short /CL at $68.50 as we can see from the news that the only reason oil popped back up is a statement from OPEC that they expect a resurgence in demand – a statement not backed up by the evidence so far. As…