Trading Deck: Charts show violent move brewing

Marketwatch.com just launched an area of the site called The Trading Deck. I'm excited to announce that I will be a weekly contributor from here on in. I love the idea that the platform focuses on commentary from market professionals and not just journalists. Here is my first post from earlier this week:

By JC Parets

Like humans beings, stocks cannot go on and on forever. Even the best athletes that are in tip top shape get tired and need to rest before they can resume performing at a high level. Stocks are the same way; they need to consolidate temporarily before making their next big move. These breaks in the action take place in both uptrends and in downtrends. With each pause, comes opportunity. Usually, the longer the consolidation lasts, the more violent the ultimate move becomes when the battle between bulls and bears is ultimately resolved.

There are two extremely important consolidations taking place right now in the markets that have caught my attention. I firmly believe that when these are resolved, the next major move will be both fast and furious. The first one is in the S&P500 ($SPX). After losing about 18% in 2 weeks, the large cap index has been trading in a sideways range since the August 8th closing lows were put in. There are two ways to look at this pause in the action: is this just a break within an ongoing downtrend or has this been six weeks of base building where a sustained rally can initiate from? A breakdown below 1100 would mean a victory for the bears while a breakout above 1230 could mean the lows are in and stocks are heading higher. We are currently right in between.

Read the rest at  The Trading Deck over at Marketwatch.com