TheSlayer's Market Thoughts

SPY daily chart August 13 2013

More and more traders are noticing the daily dips and recoveries in the market and trading accordingly. Tuesday August 13 2013 was no exception, as the futures dipped to their usual spot in the low 1680 region and then recovered. The majority of the day, though, was occupied with sheer sideways chop, in the area marked out on the profile as having the spike in volume - the high volume node at the top. This area has drawn the market in for ages, and that trend shows no signs of ending.

This market is giving hope to everyone. Bears seem uncannily convinced that the market has to roll over, while Bulls have the past eight months of continual new highs to rely upon. The probabilities are slowly shifting over to the Bearish side, but just on the margin. The Bulls remain very much present. If you are daytrading, you should not be losing money this month during this sideways action.

Several have noticed that the market has been going sideways for the past week and also the past month. Actually, SPY hasn't gone anywhere since the late-May 2013 run higher after one of Fed Chairman Bernanke's virtuoso performances on Fed day. That May top didn't last more than a few minutes and was followed by a steep drop, but you can draw a line from that top to where we traded during most of today and it would be a horizontal line on your chart. The market may not have dropped permanently during that time, but it hasn't surged higher, either.

The continued failure to match the all-time highs of the first week of August isn't really concerning yet, but if it continues, that would be a good sign that the burden of proof has shifted to the Bulls. SPY now is in the very bottom of its uptrend channel, and if that breaks for good, it may be a sign that we are approaching the terminal phases of this Bull run. It's about due, of course. A dip to around the 1650 congestion area would be a good sign that the buyers are thinning out for now. We could also overshoot, and if true panic buying occurs for the first time this year, the 1500s are not out of the question. That might well just create a launching pad to new all-time highs this fall, though.

The head and shoulder pattern that tops at SPY 1709 is something we need to keep an eye on. It is one of the things keeping the Bears positive, but one good one-day run higher would take it out permanently. We just haven't seen one of those days in quite a while. Even the run a couple of weeks ago to the all-time high was lackluster. Market tempo has been tepid for weeks.

Standing back a bit, this remains a very good summer for the Bulls. "Sell in May and go away" was not a good plan at all. We haven't had the wild dips we had a few years ago, but on the other hand we haven't seen the crazy up days, either. It has become a dull market, with intraday moves that go nowhere, controlled by short-term traders scalping for their daily wages. A non-volatile summer is actually kind of welcome. That won't last forever, but it easily could continue through the end of the month. Just remember that September traditionally is the worst month of the year for stocks.