Price Resistance, Who will prevail?

Price resistance is the battle line of the Bulls and Bears.  If the market is trending and holds above price supports, I always give the benefit of the doubt to the Bulls when challenging resistance.  The selloff last Wednesday sliced right through and broke price support like a hot knife through butter.  The rally into the end of last week brought us right back test resistance levels.  Believe me, I want to see this market break higher, but because support broke, I have to give the Bears the edge at resistance.  I will remain very cautious when it comes to adding new risk at this level.  If I do decide to take any long positions, they will smaller than normal due to the higher perceived risk.

On the Calendar

Monday kicks off with no reports on the Economic Calendar but a total of 6 Fed speakers that feel the need to pontificate on interest rates.  It would appear they have a lot to talk about because tey will be talking every day this week.  We also must keep in mind that with the President traveling any news suggesting success or failure on this part could potentially move the market.  On the Earnings Calendar, we have 41 companies reporting today.

Action Plan

It was nice to have the relief of the rally last Thursday and Friday.  However, it is important that we notice the major indexes are right back into resistance zones.  The Bears have had plenty of time to dig in and reinforce their battle line trenches, and I would doubt they that they will give them up easily.  As for me, I want to manage the positions that I’m currently holding but remain very cautious on adding new risk.

I, like everyone else, would love to see the market move higher.  If I remove my rose colored glasses just for a moment, I see that price is in the perfect location for a reversal.  Please understand I am not suggesting that is what will happen!  I am only pointing to the potential danger and the reason I won’t be in a hurry to add risk.  I will happily change my thinking if the Bulls find the energy to overrun the Bears defenses.

Trade Wisely,

Doug