The Nasdaq is leading the way up with a new high last week, while at the same time the SP 500 and the DJIA made lower highs before closing lower for the week. The SP 500 continues to be restrained by resistance at 875, while the MNX should soon hit its 200 day MA at 140. Only time will tell which one of these markets is going to lead the way.

The market has been fairly quiet lately, which presents a good opportunity to place Bear Call Spread trades above resistance levels in order to collect premium while waiting for the next buying opportunity.

JD

Market action this week did nothing to clear up the  picture of where it is headed next. What I can tell you is that the SP 500 stopped dead in its tracks at 2 month old resistance at the 875 level.  There seems to be quite a battle going on between the Bulls, who are currently in control, and the Bears, who seem to be waiting on the sidelines to pounce on their unsuspecting prey.

As I’ve said before, I do believe that we have seen the worst, but there will probably be one more opportunity for a bearish trade before I would call this the start of a bull market. This week should be interesting.

JD

Or are the bears gonna be left behind?

Pick your indicator, the daily charts are showing bearish divergence all over the place, but the weekly charts still look pretty good, except for the fact that the volume on the SP 500 has been going down every week since this rally off the bottom started.

With the 50 day MA holding last week, the market continues to show indications that the worst is over. Every pull back in this rally has run its course in a couple of days. The talking heads are beginning to sound like we are in some great bull market. The current optimism seems a little scary. So much so, that I’d be a little cautious before jumping on the band wagon now. On the other hand, if you have been trading this rally since we pointed out the loss of momentum on the down side, it may be time to take some profits.

What do you think? We would love to read your comments.

JD

The last time I wrote about the stock market losing momentum was just 4 weeks ago. At that time, as you may recall, the market was hitting levels not seen in a dozen years. Since then, the SP 500 is up over 20%. That is an amazing run in only a month. You would have to go back 70 years to find a better one.

While I do think we may have found the market bottom at the 666 level on the SP 500 we are due for a pull back before this rally goes much higher. To illustrate that point, notice that we have another divergence with the price action and the momentum indicator, this time hinting that stocks may have run out of steam. Short term traders should get an opportunity for a bearish play soon, while longer term traders should get a better opportunity to place bullish trades over the next several weeks.

JD

SP 500 April 3, 2009