S&P 1220 The Most Important Level In The History Of Traded Goods

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October 14, 2011 1:16pm NYSE:IVV NYSE:IVW

There are no unused superlatives to describe the trading range that’s been trapping markets for more than two months. The range has become something akin to the moon 100 years ago; it just sits there, placidly

denying man’s feeble efforts to impact it in any way.

Just about every trader we’ve spoken to on Breakout for the last month has genuflected before “The Range.” If I hear “I’m positioned defensively” again I’m going to go chicken killer. Heck, if I say “I’m positioned defensively” again I may rip out my own tongue. From where I’m sitting the time for defense is ending. Range-bound though we are (as I type), stocks are moving higher more readily than they are falling. No one is positioned properly for a strong breakout, save for those “buy and hold” types who’ve gotten to enjoy the entire collapse.

(This being Wall St., that likely means the range will have ceased to exist by the time you read this note. If it’s after 4pm on the East Coast and your screen says the S&P closed at 1,225 or more, please disregard and re-title this column “Stocks Make A Giant Leap for Mankind”).

Good trading means making plans then ripping them up as events warrant. A couple weeks ago my plan was to add to my cash-heavy portfolio as the market fell through 1,100 and toward 1,000 on the S&P. As we all know, 1,100 held and stocks ran straight up to the top of the range yet again. The ostensible catalyst was an announcement from the Germans and the French that they had plans for Greece and the EU, and then announce it sometime later this year. This wasn’t fundamentally good news but the markets acted like it was the Second Coming of the Internet bubble. When stocks stop trading down on bad news (like China’s stockpiling of copper and Alcoa’s (NYSE:AA) forecast of doom), it’s a bullish sign. When stocks start ripping higher on news, no smart person on earth regards it as a positive sign.

See the full “Breakout” segment below:

Related ETFs: SPDR S&P 500 (NYSE:SPY), iShares S&P 500 Index Fund (NYSE:IVV), iShares S&P 500 Growth Index Fund (NYSE:IVW), iShares S&P 500 Value Index Fund (NYSE:IVE)

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