Shearing the Market's Many Sheep

Up until this "breakout" in public awareness, the markets were relegated to the dark corners of the financial press. Monday, June 17th, 2013     Shearing the Market's Many Sheep   Front-page suckers lose again An end to the chop-fest? Plus: economists vs. the market   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner In late May, this year's market rally found its way to the front page. Up until this "breakout" in public awareness, the markets were relegated to the dark corners of the financial press. But of course, the Johnny-come-lately crew had to deal with immediate disappointment. Stocks started to fall behind as soon as the bull market got its top billing. The universe aligned perfectly. On one hand, we had an overextended market that was ripe for a pullback. On the other, more economic concerns—this time of the Fed variety, including interest rate and tapering speculation. Ultimately, this is the medicine stocks needed. Despite what the worried headlines tell you, it's good to see the market take a breather after a scorching start to the year. A few weeks ago, I wrote that a false move lower that shakes out the late money and attracts new short positions would give us a healthier balance. Now, just a small touch of volatility has put many market watchers back on the bearish side of the fence… "Last week's whipsaw action left many market participants feeling like sheep about to be sheared," says our own Steven Sarnoff. "Though the week ended looking lower, overall erratic and indecisive price movement calls for rest. Sometimes, the smartest thing a trader can do is stand aside." Sure, it sucks when the market tells you to sit on your hands. But ultimately, buying and selling at every hiccup will drown your account. By now, you know the drill. The longer-term trend remains higher. You can this pullback as an opportunity to reevaluate your positions and prepare your next plan of attack. Even if stocks continue their sideways journey, the market will reveal new leaders. Meanwhile, the S&P is stuck on pause: Note how the index is getting squeezed between its 20-day and 50-day moving averages. We need to see price hold above the 50-day moving average if we want the market to maintain its "innocent until proven guilty" uptrend. And if you're looking for upside momentum to return, you'll want to see price finally break above the 20-day that held it down during last week's chop-fest.     Rude Numbers Targets, Predictions and Wild Guesses   13,033 is where you'll find the Nikkei today. The Japanese index gained more than 346 during Monday's session. Meanwhile… 1,630 marks the spot for S&P futures early this morning. A strong performance in Asia and a lower Yen are helping to push futures higher today $1,382 is where you'll find spot gold today. Gold has been stuck on pause in the $1,380s for more than a week now… $21.70 is where you'll find silver futures. The big spike toward $22.50 late last week isn't holding this morning… $101 buys one Bitcoin today, marking the end of another uneventful weekend for the alternative currency     Rude Trends When to Buy... When to Sell   "The nice thing about economics is that almost any prognosticator will be proven right," replies a like-minded reader. "At some point. Eventually. Probably temporarily." Ha—sure… Heck, even predictions that are purely market-related can be twisted into undeserved victories. If the market drops 20% next month, I'm sure plenty of people who were bearish since 2009 will dust off their trumpets. Never mind the fact that they missed a triple-digit rally over the past four years… That's why I rely so heavily on the market's price cues. Think at all of time investors wasted squabbling over the fiscal cliff late last year. Or more recently, the sequester. Nine times out of ten, I won't even read an article or a blog post if it starts to deteriorate into that kind of speculation. It's just not that useful in the trading world… All of the B.S.—the table-banging, the bickering and the complicated predictions are all distilled into price. I'll let the economists crunch the numbers in their Excel spreadsheets all day. I'll just stick to reacting to price action. If you want to consistently beat the market, I suggest you tune out the noise and do the same… [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   Brand-new legislation, eerily codenamed "Unicorn," is being hidden from you. Get prepared now. 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