Since mid November the equity markets have been flat with a very mild upward bias. During the past week we received a couple of longer-term signals to buy the emini March S&P futures contract and to exit the position. Its rare for us to get longer term signals that quickly take us in and out of the market. Thus beginning the question ; is this a market without a direction?

In the last few weeks we have been questioning whether the market had the legs to keep moving higher or has the overbought market become a bit tired as expectations of profits and the economy appeared to get ahead of itself.

From a target perspective, several months ago we calculated 1020 as longer-term resistance area and 1170 as a major long-term resistance level where the market should find some correction. Considering we reached 1148, as the current high, before selling off, we may now be in a correcting process.

Keep in mind corrections can take place in a few forms. 1) Price basis: the price could reverse to major support levels. 2) Temporal: where the price doesn't really move, but the market just marks time and moves sideways until the next leg.

On 12/21/09 we received a longer-term buy signal (basis the March contract). On 1/12/10 the longer-term buy signal ended, but was not confirmed by the DJ that a short signal should be starting. But we were getting a sell signal for the emini NASDAQ contract on 1/12/10. Thus creating a confusing scenario. For several weeks it appeared the market has be seeking some sort of equilibrium and trying to discover where it should go next.

On 1/15/10 we received another longer-term buy signal for the emini S&P. On 1/19/10 the long-term buy signal ended. On 1/20/10 this was confirmed as a longer term sell signal by the DJ contract.

Where do we go from here?
On 1/11/10 the March contract reached 1148 and tested that high on 1/15/10 at 1147.25 before selling off into 1/22/10. There are initial indications that the market may be getting a little oversold in the short term.

We are not looking for a major sell off, but only a healthy over-needed correction before the next leg up.

There is an initial resistance, basis March at 1097  to 1105. If this level is broken, the next level of resistance is 1115 to 1128. Both of these price areas were major resistance levels prior to the market moving higher.

There is an initial support level, basis March at 1089 to 1075. If this level should be broken there is major support at the 1059 to 1040 price range. Ultimately if the market should have a sharp sell off, somewhere around the 950 price range should be a bottoming of this correction, if the 1040 area doesn't hold.

There is one major assumption coupled with a short-term price correction: the assumption is that we don't enter a double-dip recession. Stay tuned!!

Since mid November the equity markets have moved higher, but in a choppy process. Its currently hard to determine if the market is in the process of forming a short term top or building a stage for the next movement upward. As the new economic and earnings reports are released, many of the reports are proving to be less than expected. This begs the question as to whether the market has factored too much expectation for a recovery to happen too fast.

The 10% December unemployment rate (U-3) released earlier this month may be a bit of a statistical misnomer as more people dropped out of the labor market and showed up in the wider definition of unemployment (U-6) and at 17.3% and increased from the November rate of 17.2%.

On 1/15/10 we did get a longer term signal to be long the market. After exiting a long position on 1/12/10. This was a confirmation from a longer term emini March DJ long position we received on 1/28/09. On the same day we also received short term signals to go short or exit the long positions. Its rare we receive opposing signals on the same day. Thus supporting the argument for a very choppy process.

March emini S&P futures initial resistance is found at 1135 to 1140. The next level of resistance is found at 1143 to 1150. The initial leg of support is found at 1133 to 1130. If this level is broken the next support level is 1123. If the market should begin a correcting phase, there is major support in the 1116 to 1108 area with a very strong support level around 1040.