Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Stock Market Potential Breakaway Gap....Watching 956 Pivot.....

Stock-Markets / Stock Index Trading Jul 18, 2009 - 07:10 PM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleWhen we look back a month or so from now, it is quite possible that we will be talking about what took place on July 15th. It was on that day when we saw a breakaway gap over the old 912 gap that seemed impossible to get back over while the bulls were fighting to simply hold the 875 neckline. We had been testing that nasty 875 level over and over. We held when suddenly, and out of nowhere, we gapped hard over 912 and just kept on running for the rest of that day.


Volume was quite strong and the advance decline line was quite powerful as well. Two necessary ingredients to confirm such a gap up and run. If that gap had been accomplished on lighter volume or by just a few leading, heavy weighted stocks, it would make the whole move just another meaningless head fake. The bulls celebrated in that they did get what was needed in the volume and the advance decline line thus it was something that had to respected. The gap also provides good news to the bulls in that it puts another very powerful support level at 912, protecting 875 down the road. When you get a gap as powerful as what we saw Wednesday above the critical neckline at 875, it makes the task of breaking down by the bears much more difficult. Lots of money will come in and support this market at 912 now. It's an extra layer of clothing for the bulls that has to make them feel more secure. What's even more telling is how the market, on the short term time frame charts, has stayed grossly overbought since that gap up on Wednesday.

The bulls feeling braver and braver while the shorts are willing to cover more quickly than usual. They understand the power of this gap and know their task is harder here thus the desire to not stay around too long and watch their money erode away. That's how overbought stays overbought. We will need some selling soon to unwind things some but that selling should be more shallow than what we could have expected without that breakaway gap in place. It's a game of emotion and the emotional component here is the greed of the bulls versus the fear of the bears and fear is a much deeper emotion to deal with. People respond to fear a lot faster than greed.


 
With all we have seen in the past three trading days, I guess that means that we will be rocking higher soon. Well, that's not necessarily the case. I do believe that we will take out that 956 pivot soon but you have to keep in mind that we have been here before. True, we didn't get there the same way technically but we are still trading below 956 and that has to be fully respected. the bears have found ways in the past to keep the market from clearing. I don't think they'll be able to do that here, at least once we get some healthy unwinding.

However, you never go overboard and go 100% in equities until you see the 956 level in your rear view mirror. It needs to clear and run not clear and churn. Until this takes place, please play this game appropriately and keep your exposure to no more than 50%. You can't go wrong keeping it less than that but if you need to be more aggressive, keep it to 50% please.


 
Sentiment Analysis:
 
The bears are rocking. Many reliable surveys have more than bulls entering this weeks action. That's not something you see too often. The latest survey of market advisors also shows a dramatic increase in bears last week of nearly 6% along with a major decrease in bulls of lightly over 7%. This 13% difference has cause a dead heat at 35.6% bulls and bears. That's normally very bullish. Far too many bears. Par is not normally what you see in bear markets. When you get an equal number of bulls to bears it's rare to see the markets decline. In addition, the Vix and Vxn have broken down which usually sets up a formula of higher equity prices. From a purely sentiment perspective, the bulls have the ammunition they need to see overall higher prices. Nothing straight up but higher prices for sure. Add in the fact that many on the financial stations are still ranting on about that head and shoulders which has already been made null and void with the action over the last three days and lets just say that I don't expect a whole lot of downside action other than normal overbought oscillator unwinding that always takes place in good markets.


 
Sector Watch:
 
Thanks to some very strong reports in the Technology Sector the Semiconductor, PC, Software and Telecom sub groups saw very strong moves during the week and continue to lead the market higher.  Intel (INTC) and IBM (IBM) reported blowout numbers and Google (GOOG) came in solid although sold some after a strong upside run.  Apple (AAPL) reports next week and will be inflectional for the Techs. In addition, some strong numbers in the Home Construction area started to lift that group late week.  See our 5th and 6th charts below.  The Banks moved higher on the back of a blowout report by Goldman Sachs (GS) and solid numbers by JP Morgan (JPM).  The Transports remain mostly mixed with many reports due out next week.  Copper and Shipping Rates two areas that tend to lead the economy continue to show good price action.  Most other Commodities showed signs of firming up as the week wore on including the Oil Service area.  Earnings continue to have a major impact on specific groups and are providing some nice visibility not only for the past quarter but more importantly looking forward.


 
The Week Ahead:
 
A major week for earnings reports. Week number one was huge but there isn't a shortage of important stocks reporting this week. Some of the big ones are Aapl on Tuesday along with Cat, Fcx, Btu, Mrk, Utx, Lmt, Yhoo, Gild, Unh and Amd. Monday has Txn and Lm. Wednesday we see earnings from Ba, Genz, Wfc, Pfe, Ebay,Qcom and Ms. Thursday it continues with  Bni, Unp, Mmm, T, Ups, Nue, Cme, Dhr, Axp and Amzn.

You get the idea. The market will be affected by these reports. If the majority are good, it'll help the Sp break over 956 but you know it won't be easy. We are very overbought on the 60 minute time frame charts and on stochastic's on the daily charts. The bears will fight 956 intensely. If we do clear, and i think we will in time, the bears will be forced to cover but we aren't there yet. Some selling to unwind things would be best for sure before a stronger move up is made. Interesting times. Let's see if the Sp can make the move this week.

Peace
Jack Steiman

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Sign up for a Free 30-Day Trial to SwingTradeOnline.com!

© 2009 SwingTradeOnline.com

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

Jack Steiman Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Charl Liebenberg
19 Jul 09, 01:28
Excellent analysis Jack!

I always look forward to reading your weekly market reports. I fully agree with your opinion that the markets are moving up in the short-term and also I think that the bears are going to be slaughtered in the next 6 to 12 months


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules