Small Cap Network Blog

Wake me up when something starts to happen with the stock market; I can’t stare at this stagnant chart any longer. I’m not trading it, but if you are, I’m guessing you realize this thing’s going nowhere fast. It’s your call, but in my experience, trying to ‘force’ a trade in the wrong or choppy environment is a recipe for disappointment.

In any case, here’s what I’m looking for - on an index by index basis - to tell me it’s time to make a trade-worthy market forecast.

S&P 500

Even if you’re a generous optimist, you’d still have a hard time arguing for bullishness here. One support line has been broken, and another is close to cracking. The highs and the lows have been getting incrementally lower over the past three weeks. If 1263 breaks (last month’s lows), look out below. On the off-chance the bulls take over again, a move past 1300 will be the key to sustaining any rally.

NASDAQ Composite

I see a wedge forming here, with the Composite pressuring the lower, support side of it. In fact, Wednesday’s low of 4093 is practically on top of it; we’re only a few points away breaking down here. On the upper side, there are actually two resistance lines….the major one at 4223, and the minor one at 4250.

Dow Jones Industrial Average

This is a pretty clear wedge too. The lower side (support) is at 11,416, and rising. The upper edge (resistance) is at 11,715. Like the NASDAQ, the Dow keeps knocking on the bearish door. Nobody’s answered yet though.

Russell 2000

I bailed out of my Russell 2000 puts last week, but now I wish I would have held onto them. That ridiculous rally did indeed lose steam, and it looks like this index is trying to resume its trip back down to the lower end of its trading range…to 671. The only other potential support I see is a rising support line that extends back through August’s lows. I’m not sure how significant it is, but if we see a move under 725, that could really get the bears rolling.

It’s possible, though unlikely, we’ll see all these charts reach these bullish or bearish milestones simultaneously. If we see enough of these things happen (maybe 2/3?), then we’ll have enough of a reason to actually pull the trigger on an index-based trade. Bear in mind that certain stocks can and will defy the market’s overall trend, though most won’t. 

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I thought this stock pick may have been dead in the water, judging from the last couple of months.  Tenet Healthcare (THC) had been stuck around the $5.70 area since May. However, today’s move to $6.57 not only breaks the stock out of that rut, but may well have kick-started the final move of this trade.

Our target is still $7.67…  the high point from 2007 we saw touched two or three different times in the first half of that year. In the meantime, we’ve seen a new resistance line come into play.  Using the December of 2007 peak, and then the May of 2008 peak, we can extend that line right up to the upper $7.00 area by the time it’s revisited again.

We’re not there yet, but it sure beats the alternative.

For those of you who got in waaayyyy back in November (at $4.06), you’re up about 61% now. Not bad, though we think more is on the way.

If you were thinking about jumping on board, at this point, I wouldn’t. We’ve got a new pick for you right around the corner, and I’m sure you’re going to want to keep some money ear-marked for that one.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.