Good Morning, Traders. We have been receiving an inordinate number of e-mails lately that are asking our opinion of where this market is heading in the near term. At certain junctures, we have absolutely no qualms about admitting to both ourselves and our readership that we simply don't know. This is one of those times. Please read the following commentary carefully as it may come of use to you in the future. In yesterday's column, we noted all of the mixed signals that have abounded in the market as of late that is making things unclear as to near-term bias. In today's chart of the S&P below, we will go over some others. On the S&P daily graph below, let's go over the five points in detail to further illustrate the recent choppy action. Prior to point 1 the market was selling off slowly in June and made new swing lows for the year. Then on June 29, the FOMC meeting caused the inordinate rise that you see on the chart. After a seven-day period of consolidation at the 200-period moving average on the dailies (which would indicate that the Fed move might actually hold), the Fed rally promptly disintegrates and sellers took the market almost back down to the June lows of the year (2). Two days later, Bernanke speaks again and the market rips higher to point 3. Within two days, the market takes back that move on geopolitical concerns and moves to 4. Then, some heavy earnings news and slightly better than expected economic data take us right back up through the two days of weakness to close higher than when Bernanke spoke (point 5, current day). This current pivot is now threatening to break the downtrend line of the bear move that was ignited back in April of this year. A downtrend that has been characterized by extremely bearish overall volume patterns giving us an inordinate amount of distribution days. So, the question remains, where is the market headed in the near-term? The answer is of course that there are too many mixed signals (see points 1-5 above) to know at this point. Moreover, when you don't know, don't guess. One of the biggest mistakes novice traders make is that they think they always have to know where the market is heading, and that they always have to be in it. Neither could be further from the truth. We go to an S.O.H. (Sit on Hands) mode where we simply do not trade intraday because we cannot identify the bias at that juncture. When the situation clears up and we have a better feel for which direction the market is about to go, it's uncanny how great trading ideas seem to come out of nowhere. Swing and position trading is the same. You do NOT have to have your capital at work 365 days per year to earn a great return. When conditions are favorable, go all in. When they aren't, do nothing. Overall bias is sideways with very heavy flow of earnings reports this week. Market is very sensitive to news currently and as you can see from the volatility in the picture below any positive or negative blurb can push it hard in either direction. Be careful out there.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.