They’re not making it easy for us, are they? After a breakout day Monday, the market has been range bound with a slight downward slant for the last three days. If the overall trend was up, I’d say this is very bullish action – a breakout followed by a couple slow days on declining volume. But the overall trend is not up, so these pauses make us a little nervous.

Well they don’t actually make us nervous because it’s not like we have to definitely figure out what will happen next. Our job instead is to go with the flow, and right now there’s a gentle tide up. We’ve had some good breakouts from the Long List, but since we’re trading opposite the overall trend, we need to be a little quicker taking profits. At the very least partial profits should be taken and stops nudged up. If the market pulls back, at least we made something. If it continues up, we’ve left a few shares on for the ride. Trading is never about determining what will happen. It’s always about playing the odds.

Let’s review the daily indexes charts. They’re all consolidating.

The Dow broke out Monday on decent volume but has moved sideways since. Instead of using a measured move to determine a target, we’re just using the recent highs. This constitutes a mini move up within a two month consolidation period. Don’t overstay your welcome.

Unlike the Dow which has room to move before hitting resistance, the Nas has resistance just overhead. Our target from this weekend (1600) has already been hit. Now we’re looking for a breakout and measured move to 1800. But of course we still have those damn gaps below.

The S&P looks like the Dow…a promising bull pennant within a mini uptrend that should resolve up with cooperation from the overall market, but those damn gaps linger below.

Like the Nas, the Russell has broken out but has bumped into resistance from mid November. If the market moves up, this chart along with the Nas will be key. We need them to lead, not lag.

So the overall trend remains down and the intermediate term trend is neutral with perhaps a slight downward slant. Short term our bias is to the upside. If these little consolidation patterns can resolve up, the market should leg up for another week. But this goes against the prevailing trend, so we gotta keep playing good defense.

Have a great night.

Jason Leavitt
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