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The Keys To The Next Market Move

The markets are having their second straight bounce day on the back of light volume and continued semi calm in the Middle East and Northern Africa. Libya continues to be in a civil war but overnight China began putting pressure on Moammar Gadhafi to step down. This helped drop oil back to the flat line which pushed the futures higher. The key to oil and the markets remains, whether or not the unrest spreads to Saudi Arabia.  The United States Oil Fund LP (NYSE:USO) is currently trading at $39.46, -0.22 (-0.55%).

After a major drop early last week, Friday brought a change in direction. The markets bounced sharply. Today, we are seeing further gains, though smaller in the indexes. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $132.88, +0.55 (+0.42%). While the markets are bouncing for the second consecutive day, they are still below the $134.69 pivot 52 week high. As of now, this is called a classic retrace higher. The next few days will be extremely key to whether or not the markets will break out or turn down again. With confirmation to the downside, intelligent traders are starting to look for a secondary move lower. Traders will continue to look for this starting at today’s highs at $133.32, as long as the SPY does not take out the $134.69, 52 week high.  Should the market take out the highs again, then traders will look for further upside.

This maneuvering is based on technical pivots and the understanding of price pattern and time. By using these methods traders will see exactly when momentum switches and price changes from bullish to bearish or bearish to bullish.

Gareth Soloway



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