The level of disagreement in the market between the bulls and the bears is reaching another climax. And when disagreement rises it usually foretells some kind of a pivot point in the market. A pivot point can be nothing more than a consolidation near a support or resistance region, or a significant turn to a new direction, albeit even for a short time. We are at the point where the slightest of moves in the markets bring out the loudest of bears or bulls in the mainstream financial media. A move up of 200 points will bring Larry Kudlow to the TV and say his mustard seeds are working. And a down move of 200 points will have Art Cashin saying the bottom will be re-tested. So what is a trader to do?

It is at times like these when the wild swings can take out the best of traders trying to navigate the waves. A high level of disagreement in the market brings about some incredibly wild intra-day swings. And even well seasoned traders are pulling their hair out trying to make a buck during the day. The ’smartest’ traders will put on a small position for a possible turn in the market, but most money will remain in cash. Experience and smarts don’t go hand in hand all the time. Just because someone has been trading for 30 years does not mean they are the smartest of traders. It could be that 30 year trader has just been getting by, while the smart ones make the large money year after year. What separates the smart traders from the crowd? Very simple… it is patience.

The desire to be ‘in the market’ all the time can be a detriment to ones trading capital. The greatest traders throughout time have all had one thing in common; which is

the ability to be patient. They have always let the trades come to them, not trying to chase trades.

With the market currently exhibiting a high level of uncertainty with respect to the near term direction, the ability to trade it remains difficult due to the wild swings. Some have asked me why I am not trading aggressively. The answer is very simple, because I am very patient. Going back to the best traders throughout time another trait has always come through; which is that they don’t try to trade tops and bottoms. The idea of getting in at the very top or bottom of a market move can be financially rewarding if your right… but if your wrong it can be disastrous. The smart traders always wait for the best risk/reward setup as possible before putting capital on the line. And even then they keep a short leash on that capital and will pull it back in at the first sign of trouble.

Last week I mentioned that there were two very key levels that had developed in the S&P 500 E-Mini futures. Those levels have set the stage for the bears and bulls to declare a short term victory or defeat. As long as the S&P 500 futures remain locked in between 815-820 on the low side and 900 on the high side then trading is very difficult. It is these two levels that should signal the direction of the near term direction of the market:  A break above 900 should set the stage for a bear market rally. A break below the 815-820 level will signal the lows of November are going to be revisited sooner than later.

If we do get a bear market rally then the question is ‘how high and how long will it last’? An excellent question, but from a technical perspective all we can go by is very significant resistance levels to watch for the next turning point. And with the market being over sensitive to news events the next turning point may be news driven and not technical. The S&P 500 chart shown below highlights the important resistance levels that are very likely to be the end point of any bear market rally and the start of the next significant down move in the markets.

The chart reveals significant long term resistance levels at ~950 and 1075-1150. On the short term chart (shown next) resistance at 875, 900, and ~1000 is revealed. All of these levels, short or long term, could be a turning point for any bear market rally.

This morning over the news wires I got the headline that OPEC is considering significant production cuts (posted this morning). That ‘may’ put a floor under the current declines in crude oil prices. And the chart shows me that news may be the turning point that coincides with a technical support level. Crude oil prices have declined rapidly on the global slowdown. But there has to be a turning point at some point and I feel that turning point may be upon us. The chart shown next is crude oil prices over the past 20 years. Observe that $40 is a price level that has significant price support. We may very well see oil begin to trade in a range between ~$40 to ~$60 over the coming months before a significant break above or below those levels.

And what is up (or down as the case may be) with the US Treasury note yields. The decline in the yield of the 10 year notes has been mind blowing for even the experienced traders on the NYSE floor. The amount of money wanting to escape the equities market and seek the (perceived) safety of Treasuries has been unprecedented. But as the chart shows it may have reached a support level and is poised to begin moving back up. If yields begin moving back up it may coincide with a bear market rally, but it also would mean that interest rates (i.e.- mortgage rates, etc) would also move back up. That would be a condition that would hamper economic growth further, and could be the killer of any bear market rally.

My long term views remain bearish for the markets and for the economy. I will short any bear market rally for the primary trend of the market remains solidly bearish. Should a bear market rally occur here you can be guaranteed there will be people everywhere proclaiming the bear market is dead. Don’t believe them for one minute. We are in a secular bear market that may last for many years to come.

Note: To make it easier to read the nightly commentaries I will include charts in the posts to make reading easier. But, they are also being uploaded to the forum so all readers can easily find them again, and the charts posted in the forum are full size. The charts are listed by date and name in the charts section of the Rebel Forum .

Some other charts tonight:

Nasdaq 100 Index (two charts)

CBOE Put/Call Ratio

Financial Sector (XLF)

Thank you for your comments about the re-design of the RebelTraders site. Over the coming days there will be additional refinements. I hope you will find the updated site easier to read and more user friendly.