Back To Near The Breakout...

Get near the top and sellers come in. Get to the bottom and buyers come in. Five months of sideways action does not feel good as there's always frustration felt by everyone. One week the bulls feel good, the next week the bears feel good. But it doesn't last for anyone. You'd think, for sure, something's about to happen based on technical's, but then those technical's stop working, and you get reversals you just normally don't see. After a while both sides stop trusting what they see, and who can blame them to be honest. There have been multiple times in the past month, let alone the past three to four months, when it seemed just about guaranteed that either a breakout or breakdown was imminent based on previous short-term action.

So last Friday gave the bears lots of hope as they just stopped the bulls from breaking out. They had gotten themselves a beautiful move lower that seemed destined to continue. Then came Monday morning and those futures. Not what the bears, nor most bulls, I'll bet, were expecting to see. A nice strong gap up. Nothing off the charts bullish, but once we opened up the market started to move higher. A nice bullish day, although no breakout here. No close over S&P 500 2119 with force. That could mean another unexpected selling episode could follow, even though there's nothing technically on the daily chart to suggest that will be the case. Of course, some day we will either break out or break down, but who knows how long this will keep going. The answer is no one. So here we are more towards the top of the range. Not far from a real breakout for the bulls, but by no means should they count on it coming to fruition. Both sides need to show they have what it takes. Day to day.

Earnings season is rocking here. The biggest time of this quarter. This week will have the big boys and girls reporting. Tomorrow morning is important as Kansas City Southern (NYSE:KSU) is reporting. One of the railroad leaders. These stocks have all been hit hard to the down side, which in part has been responsible for the poor overall performance in the transport sector. If the rails can start coming through with lowered expectations the game here, they can rock up and carry the transports with them, which would be huge in helping this market break out.

On top of that, we have Apple Inc. (NASDAQ:AAPL) trying clear trendline resistance at 128.00. If that gets through that would help carry many different indexes higher. If AAPL is breaking out and the rails join that party it would be very hard for the bears to hold the bulls back from breaking over 2119 on the S&P 500. The big boys and girls will have to show they're worthy of breaking out but again, since expectations have been lowered it shouldn't be as difficult as it was last quarter. Remember, we're in Disneyland where bad numbers can be spun bullish. We shall see starting in earnest tomorrow morning.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

In a market such as the one we're dealing with now it's important, should we break out above S&P 500 2119, to make sure the breakout holds and to not buy heavily until you see evidence that the bulls have truly succeeded. A close at 2125 is hardly a forceful breakout. You also need to see volume come in when a market breaks out. Volume is extremely over rated in terms of day to day importance. It's really only important at key levels of resistance and support. At trendlines and the like. When a market breaks out it's very important to see big money come in and support the move. A retail volume breakout day does not give me lots of confidence that a breakout will hold and move further north over the short term. For now, we watch and gain information about what to expect. Day to day until one side proves worthy otherwise.

Written By: Jack Steiman