All of a sudden, the action in the stock market is a lot like the weather in San Francisco. If you don’t like it, give it a few hours. It’ll change.

Bulls were frustrated and bears were energized for a few days last week when the stock market reversed huge up-moves and closed lower. Then the bears got frustrated and the bulls got energized as the market blasted higher on Friday and Monday.

Yesterday frustrated both sides as the S&P rallied to 2789 early in the morning – nearly tagging the 2800 upside target on the 15-minute chart we looked at Monday. But it wasn’t close enough to the target for bulls to cash out of long positions or for bears to establish short trades.

Then the market reversed course, gave back all of Monday’s gains, and the S&P closed the session at 2744 – pretty much right back to where it was almost two weeks ago.

We’ve seen lots of volatility in the market lately, but no real movement. And it’s frustrating the heck out of most traders.

Remember, though, what I wrote on Friday…

In this sort of “nuts” environment, traders will do well to remember one thing… You’re not going to catch every trade. And if you try, you’ll likely end up taking losses.

It’s a far better strategy to take a step back. Map out a plan for where you think the market is headed over the next few weeks. Then… ignore the short-term swings and stick to that plan.

The stock market’s job is to shake us out of positions. It’s going to test our thinking. It’s going to make us second-guess our well-thought-out plans. In short, the market is going to make us nuts.

But, if we step back and look at the bigger picture… if we avoid the temptation to profit on every short-term move… then we can ignore the “nuts” moves. We can stick to our strategy and hopefully profit if/when we’re proven right on the trades.

For what it’s worth, I’m bearish for the short term. I’m sticking with the idea I mapped out a couple of weeks ago – that the S&P 500 will come back down and retest the 2580 closing low. That’s where I’ll be looking to put money to work in new long positions – especially if the technical indicators become extremely oversold.

The bullish view would have the S&P 500 holding up here above the 2730 level and making an immediate attempt to get above yesterday’s high at 2789.

And, that’s what makes today’s action so important. You see, based on the look of the 15-minute chart of the S&P, both the bulls and the bears can make a compelling case. Take a look… The index closed yesterday near the 2750 level. The bears had to make a stand yesterday and reverse Monday’s gains in order to keep the possibility of a retest of the lows alive.

Now, in order to strengthen the bearish argument, the index needs to dip below support near 2700. That doesn’t need to happen today necessarily. But the market needs to head in that direction.

The bulls need to make a stand right here and get the S&P 500 back above the 2750 level. That keeps the immediate momentum bullish. And if the market can make a higher high – above yesterday’s 2789 level – then it increases the odds that we’ll just head right back up to new all-time highs from here.

Personally, I favor the bearish argument. But both sides can make a compelling case.

Best regards and good trading,

Jeff Clark

P.S. No matter which way the market turns, my Delta Report subscribers are set to profit from the low-risk/high-reward trades I send them each week.

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