The market has spent most of its time meandering in a very narrow range. In the big picture, we shouldn't be surprised to see that the market is groping for direction. Because the charts reflect that the market is in "limbo," participants seem to be confused as to whether we are in a bull or bear market.

Because the market has really been in a trading range for most of the last year, creating false breakouts in both directions, the question of whether we are in a bull or bear market is not important for the time being. What is important is that the market is finally showing a strong tendency to expand the trading range -- and, although this is not "great" for investors, the stability is "good."

However, the segment likely to benefit the most from an expansion of the long-term trading range is definitely the active trading community. Wider ranges mean more opportunity to capitalize on short time frames, and traders aren't forced to compete for profits in a tight space. The notion of an expanding long-term range is definitely very exciting for the active trading community.

Let's take a look at the charts:

Chart notations:

• The S&P 500 daily chart shown previously addresses the short- term time horizon.
• We followed up on last week's analysis of the same time frame here and note the Broadening Range Formation (indicated by the blue numbers), the speed bar (gray area) originating from the post-election breakout and the trendline from the August swing low.
• We combine these technical points to develop an area, both in price and time, where the market's recent decline is likely to culminate.
• It is very important that the market finds support here because, if it doesn't, this would lead to a domino effect of technical breakdowns, not just in the time frame analyzed here, but also on longer ones. As a general rule of thumb, the S&P's dominant uptrend is still intact so long as it is trading above the 1160 area level.

Chart notations:

• The 15-minute, day intraday chart of the NASDAQ 100 index shown previously addresses the very short-term time horizon.
• We put this chart up to demonstrate the market's constant tendency to return to speed bar areas, despite what may have seemed to have been the contrary only a short time before.
• Speed bars are to be treated like gaps. The market's "speed" tends to skip several levels during fast moves. These vacuums of liquidity (gaps) are not visible on most charts although we have found, too many times before, that the tendency to return to speed bar areas is very high.
• The analysis of speed bars and the return to speed bars cut across all time frames. It does not matter whether it is an intraday or even a monthly chart. We have, here, another example of this tendency, surely not the last one we will see.

Chart notations:

• The weekly chart of the Dow Jones Industrial Index shown previously addresses the short - and intermediate-term time horizons.
• The Dow chart is somewhat similar to our S&P chart that preceded it. However, we are looking at a longer time horizon, and the blue trendline here is primary degree.
• As with our S&P 500 chart, we identify a similar Broadening Range Formation (marked with red numbers) also headed for Point 4. 
• We are looking for the market to find support at Point 4 (new low) of the Broadening Range, just as it coincides with support from primary trendline.
• Beginning March of 2003, the trend of the Dow turned strongly upward and into early 2004. For most of the remainder of 2004, the Dow went into a corrective phase dominated by a mild downtrend, which ended in November with the post-election rally. Thereafter, the Dow resumed its uptrend to new multi-year highs. At this point, the overall uptrend is still intact so long as the market is trading above the primary trendline.

Fernando has more than 6 years of high volume professional trading experience, with a long-term track record of profitability. He helped develop the original material and coursework for Online Trading Academy. He has designed and individually conducted courses for 400 trading students and several hundred others in lectures, forums and intraday participation within the day trading education and advisory community. He has also co-authored a best-selling book: Strategies for the Online Day Trader, which reached the overall best-seller list on Amazon.com, and the section best-seller list for Barnes & Noble and other notable sources.