By The Disciplined Trader

As the markets climb higher I have sat on the sidelines and watched this amazing run up. Yesterday’s short-lived decline in the FTSE 100, on bad economic data, came after a 10-day winning streak and the markets have resumed higher today. It feels like nothing can derail this mighty bull. Calls for a correction are growing louder and what I find troublingis that despite the bad economic data the markets just don’t seem to care.

In the last two days there have been four reports that were worse than expected: EU GDP; US industrial production; US housing starts and US jobless claims. Yet people continue to buy this dreary news!

Ignorance of the broader macro picture has been blissfully rewarding, but why? It could be the sense of security offered by perpetual stimulus, but isn’t that too good to be true? Apparently not for the stock market, it’s become a one-way bet as echoes of 1999 eerily spring to mind. I was trading technology stocks back then.The market kept rising day-after-day, bad news was ignored and complacency became the norm. Until finally, on a normal trading day in the year 2000, momentum ground to a halt, the bandwagon back-fired, buyers stopped buying and the stock market crashed back to earth. It was something I’ll never forget. So ‘let the buyer beware’in 2013 that if this irrational behaviour continues, we could see another crash soon.

Therein lies a warning from our stock market past and I have learned that this type of behaviour is dangerous – the illusion of a healthy market is but that - the facts are very different! I believe the markets are overshooting to the upside, so I will remain on the sidelines until I spot a good opportunity, the obvious resistance in the FTSE being the July 2007 high of 6754.

The Disciplined Trader is an average guy who has little fundamental knowledge of the financial markets, yet he consistently makes money trading. He simply applies the basic rules of trading discussed in bettertrader.co.uk and executes his trading techniques applying great discipline.

Cash prices

3rd resistance	1662	Previous high
2nd resistance	1660	Yesterday's high
1st resistance	1659	Previous support line
1st support	1648	Yesterday's low
2nd support	1642	Previous resistance line
3rd support	1635	Support line
4th support	1630	55-90min moving average
5th support	1613	38.2% Fib retracement
6th support	1584	61.8% Fib retracement
7th support	1573	Support line
8th support	1552	Previous resistance line
9th support	1536	Previous low
10th support	1478	200-day moving average

 

If you are short:

1st resistance at 1660 (yesterday's high). Weak stop loss above that level.

2nd resistance at 1662 (previous high). Fair stop loss above that level.

If you are long:

1st support at 1648 (yesterday's low). Weak stop loss below that level.

2nd support at 1642 (previous resistance line). Fair stop loss below that level.

3rd support at 1635 (support line). Strong stop loss below that level.

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Stock market forecast for swing traders on the FTSE 100 and S&P 500 using technical and Elliott wave analysis.

Cash prices

2nd resistance	1662	Yesterday's high
1st resistance	1656	Previous support line
1st support	1646	Yesterday's low
2nd support	1640	Previous resistance line
3rd support	1630	Support line
4th support	1624	55-90min moving average
5th support	1613	38.2% Fib retracement
6th support	1584	61.8% Fib retracement
7th support	1571	Support line
8th support	1552	Previous resistance line
9th support	1536	Previous low
10th support	1477	200-day moving average

 

If you are short:

1st resistance at 1656 (previous support line). Weak stop loss above that level.

2nd resistance at 1662 (yesterday's high). Fair stop loss above that level.

If you are long:

1st support at 1646 (yesterday's low). Weak stop loss below that level.

2nd support at 1640 (previous resistance line). Fair stop loss below that level.

3rd support at 1630 (support line). Strong stop loss below that level.