The stock market is gently floating higher today after a mega reversal yesterday. Most amateur and retail investors are scratching their heads, trying to understand why they keep getting whipped up and down in this market, losing money endlessly. To understand these moves, one must look at the charts. The charts are like a book, written in a foreign language. If you learn their language, you have the key to profits forever.Take the seven day free trial to the Research Center and Intra Day Stock Chat. Join the elite group who is blowing by institutions with profits and success. Join this group and profit today.
On Monday, the markets opened sharply lower. The major level of support was the pivot low from August 9th, 2011. This can be viewed on the chart below. On the SPDR S&P 500 ETF (NYSE:SPY) this level was $110.30. In a late day flush, the SPY closed below that level. Once the markets closed below, the "Bat" phone started ringing at the Federal Reserve. Everyone of some intelligence was aware Tuesday was going to be critical. Could the Bernanke save the day? On a technical basis, Tuesday was the day to confirm the technical break down and collapse or hold above and save the day.
After some early losses in the stock market, the markets staged a "phony" late day massive surge. This was headed by another rumor of a major bank bailout as mentioned above. Ultimately, the SPY closed well above the $110.30 master level and the collapse was pushed off. Technically speaking, there was never confirmation of a break down below the $110.30 level. The powers that be made sure of that.
As of now, focus on that level. As long as the markets hold the $110.30 level on the SPY, neutral to upside is likely. The upside will be muted at best. Should the markets break that master level to the downside, a flush will occur, taking the SPY to the $104.50 level and possibly $99.50. This technical level means everything to the markets and Federal Reserve Chairman Ben Bernanke knows it.
As of now, the markets are trading higher. The SPY is at $113.32 +0.98 (+0.87%). Bank stocks helped lead the reversal yesterday on the bank bailout talk. Stocks like Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS) all jumped dramatically higher. Today, these stocks are pausing and pulling back slightly. There may be a short term bottom in the market but it will not last long. Institutions and Federal Reserve intervention only lasts so long.
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Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
