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Market Not Able To Breakout - The Headwinds Are Stiff

Posted by Pete Stolcers on June 11

Posted 9:30 AM ET – PRE-OPEN MARKET COMMENTS FRIDAY – Yesterday the market dropped on the CPI news and it instantly rebounded. The price action during the day was choppy and the headwinds are stiff at the all-time high. I am expecting a dull trading day with a slight upward bias.

Consumer prices rose .6% and that was “hotter” than the .4% that was expected. Surprisingly, US 10-Year Treasuries moved higher (interest rates have been moving lower) and bond traders seem to agree with the Fed’s notion that inflation is transitory.

Initial jobless claims fell below 400,000 for the first time this year (385,000). US economic releases have been strong and activity is on the rise.

Swing traders should continue to wait for a market pullback. This breakout will test your discipline. It’s very difficult to watch the market float higher on light volume and not to participate. When the selling pressure surfaces, it will hit like a tsunami and you will be scrambling to adjust risk if you buy now. The better approach is to wait on the sidelines for market drop. Instead of focusing on current positions, you will be looking for opportunities to buy. When I reference swing traders, I am talking about traders who can’t watch the market during the day and who have a 3 to 4 week trade horizon. If you are a very short-term swing trader and you can watch the market during the day, you can quickly adjust.

Day traders – don’t chase early in the day. Make sure that prices are grinding higher. The rotation is swift between groups and what was hot yesterday is weak today. Heavy volume is critically important to every trade you do. If there is no sustained volume spike the move is likely to stall just as the momentum is picking up. Use Option Stalker searches to find technical breakouts and relative strength. Reduce your trade count and size. Overseas markets were quiet.

Support is at $321.50 and resistance is at the all-time high.
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