Nov 07, 2009 (AdviceTrade via COMTEX News Network) --

by Jack Steiman, www.SwingTradeOnline.com an AdviceTrade.com publication

Market Overview:

We have a market setting up in what is clearly becoming more of a longer term lateral consolidation off the huge move up from the March 9th lows. Longer term lateral consolidations are usually what take place after a strong move has been made one way or the other for a prolonged period of time. We had a huge move higher, and instead of just quitting and rocking lower as many are calling for, this market is confusing the masses by setting up a whipsaw lateral consolidation that is playing heavily on the emotions of those who over trade.

Today was the day when the bears finally got the bad news they were looking for when the unemployment rate hit 10.2% after expecting only 9.9%. Double digit unemployment is awful news, of course, and this is where the bears should have been able to seize the moment. The fact that they couldn't tells me more and more that this is a consolidation that is going to continue for some time. Could be quite some time.

The key thing to remember is that consolidations bring out the emotions in full force and often to the detriment of traders. The range is defined by S&P 500 1101 down to 1020. 8% range and that's pretty wide and loose. With stochastics down at the lower end of the range on the daily charts, and with MACD's having unwound quite a bit, I don't see any likelihood of a breakdown, although, I am hearing so many predict the end of the world. I think they're wrong. That could change in time, but for now I don't see it. For now I see a range that will allow for trades. You'll just have to be nimble. You'll have to be sure not to over play. Keep it simple.

We are close to back testing the breakdown from the 1075/1080 S&P 500 wedge and when I study the charts I don't necessarily see a market ready to explode back in to those wedges. In time I get the feeling we will get back in them, but for now, I don't see the "energy" needed to rock back in them. The MACD's on the daily charts have unwound beautifully but they have not shot back up with this latest move higher. If they were, I'd be convinced we're about to run up again, but they're not and that's a red flag that tells me we're going to be rolling around for some time. It's not bad because any selling will create deeper pushes down on the MACD, and the lower they get without the market breaking down, the better the chance for a stronger move back in time. With markets that unwind the oscillators but aren't showing a lot of relative strength, it tells me we are in range land and thus this is how we will have to play until that all changes.

Let's discuss what the lateral consolidation likely means for this market, although, we know there are no guarantee's to this outcome because news hits and things can change from both an earnings perspective and an economic news perspective. However, after a long move higher, in this case, seven months, and you start to move sideways near the 50-day exponential moving averages, which is very normal to test after any large move higher, it says the next larger move is likely to be one that matches the one before it.

 Continued...