Market Patterns and Technicals on Money Life with Chuck Jaffe

I recently met with Money Life with Chuck Jaffe to talk the current status of the market and what moves we can be seeing soon. 

You can listen to Jason's portion of the podcast starting at 26:27, or check out our show notes below. 

Eight weeks ago, if we were talking about stock market technicals, we would have been pretty unhappy - things didn't look good. 

But there's been a pretty strong turn for the better. I think everything always looks good in the market, whether it's up or down.  It's just a matter if you can find a pattern or not... and I like the pattern we are seeing right now.

When you look at the overall market, traders such as myself like to see what I call PRP - predictable, repeatable patterns. To me, the worst market is one when it's up one day, then down the next day. 

Lately we've been getting those consistent, repeatable patterns. We've come off this down trend and entered into the next phase, which is the channeling sideways trend. 

As I look at the charts, specifically the S&P 500, you can see around 3700 mark, the market came down and hit that support level. If you go up to about the 4200 area, the market has hit that level about six times. 

The good news is the market has technically stopped falling and started to go in this sideways channel. This is helping us build a potential base for the next bull run. 

Now that it's in that predictable range, we have a confident level where we can feel comfortable buying some things and selling them as well.

I had 8000 shares of AMZN. I unloaded all of them because we had a nice run up on AMZN, GOOGL, META... even TSLA. Instead of thinking they are going to the moon, I believe in taking profit when it's there. 

The good news is that they are good companies, which is why I am comfortable buying shares of these tech stocks. We know they aren't going to zero. While everyone was so negative on the tech sector for a little while, but the reality is... Amazon is not going to zero. 

On the consumer staples side, I like Target. Target has been in a nice predictable, repeatable pattern from $145-$175. Their only real competitor is Wal-Mart, and neither of these companies are going out business. We still need deodorant, clothes, back to school items. 

Right now, Target is up near resistance so once it falls back to support, it's a great stock to buy.

If we break through and go to the upside, there are levels to resistance. There's not just one particular price point. 

If we look at the S&P 500 right now, the next level of resistance would be 4300. I would be bullish up until that point if we broke out of the 4200 level. We just have to be careful that the market doesn't run back. 

Hitting the previous resistance of 4800 would probably mean we are back to low interest rates and stimulus payments. Because of the current interest rates and layoffs that are going on, there's still going to be a ceiling. 

You have to take the fundamentals and the economy into account with the charts - you can't just say "oh it's gonna run up!" We aren't in a thriving economy with low interest rates right now so the chance of a huge bull run isn't huge. 

But, we are in a nice spot for a sideways channel and getting into those predictable, repeatable patterns. 

The market just needs time to play this out.