Twice in the last two days, it looked like the bears were finally going to break through. Twice in the last two days, the S&P 500 teetered on the edge. Twice in the last two days, the market came roaring back. And twice in the last two days, the bears went home disappointed.
Frankly, it has got to be frustrating to be a bear these days. For all of the talk of technical divergences, sentiment extremes, narrow leadership, geopolitical issues, social unrest, and secret meetings between Fed officials and Wall Street bankers, the bears have very little to show for their efforts recently.
In fact, although the S&P 500 is in a short-term downtrend and has been below its 5, 10, and 18-day moving averages for six consecutive sessions, the venerable index is down less than 2 percent from its recent high (-1.67 percent to be exact) and still sports a gain of 7 percent on the year.
Looking around, the Dow Jones Industrial Average is off 1.21 percent from its September 19th all-time high. And the technology ladened NASDAQ Composite has fallen a whopping 2.01 percent during what is being touted as a pretty miserable September.
So what gives? Why are the major indices not being taken out behind the woodshed like their smallcap brethren? If everybody knows that the combination of narrowing leadership and technical divergences tends to be present at market tops, why is the S&P still holding up like a champ? Where is the fear? Where is the anxiety? And where is the selling?
In short, it appears that traders have seen this movie before. They’ve seen this scenario play out over and over and over again in the last few years. And by now, pretty much everyone knows that the hero doesn’t die in the end. And everyone also knows that the battle cry to making money in this market is to “just buy the freaking dip!”
Take a look at the chart below. From a technical perspective, that trend channel is a thing of beauty, is it not?
S&P 500 – Daily
The red circles are also an important part of this picture…
David Moenning
Direct: 303-670-9761
www.HeritageCapitalResearch.com
David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
