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Stock Market Drifting in No Mans Land

Stock-Markets / Stock Index Trading Sep 30, 2009 - 03:49 AM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleAnd that's just the way it is folks. Boring for sure. No fun. I get it. However, it is what it is. With 1045 being support and 1075/1080 being resistance, neither side was able to get anything done today. We're simply stuck, basically in the middle of the range, thus there's nothing more to do for the moment.


There’s the usual number of red flags out there, such as negative divergences on the daily charts, not only on the index charts, but on some of the leading stock charts. It hasn't mattered thus far with those divergences being somewhat ignored for now.

The market continues to grind its way up through those divergences somehow. We also had those intense levels of overbought and although we're not anywhere near that now, we are still closer to the overbought side on the daily index charts than anything else. They came down but have now worked their way back up some.

As a trader or investor, there really isn't a thing to do here other than create headaches for yourself by over playing out of boredom. We all know how that usually winds up don't we! Very few good experiences come out of that. So, with the market down today, but with it holding above critical support, you don't want to get too excited about anything, please. Keep the wallet on the hip as the expression goes. Less is more for the very short term.

So, what is taking place here. One thing I feel sure about is that the move up is very mature. There isn't much upside left here. Possibly 1125 S&P 500, but no guarantee we get there. It has a shot but those daily charts don't look promising, although, they haven't for some time and have been able to grind higher.

There is NOT a whole lot left before a more sustainable down trend takes place in my humblest of opinions. Just too extended. Too many negative divergences abound. This will snap at some point. It is possible that the last 1080 print was the top. I thought we'd get one more up from the recent bottom. It may have already happened. It's very unclear but those daily charts stink in appearance and it makes getting too bullish, very difficult at best. At some point all of those bad oscillators, especially those MACD's, are going to come home to roost.

I WOULD NOT be thinking about buying along term portfolio here, I guess, is the best I can put it. It's time to be extremely short term oriented because that's the market we're in. Accept it or pay the price, is my thinking.

We know the move is mature. Doesn't mean much in terms of the bears getting much satisfaction for now. The onus is still clearly on them to make the move lower and to take out critical support levels. They tried the 20-day exponential moving averages. Didn't get the job done. Up big off that test. Down a drop today doesn't put them in charge. They have to take out 1045 on the S&P 500 and 2086 on the Nasdaq before they can claim even the first taste of victory.

Longer term, let's be blunt -- unless they take out the 50-day exponential moving averages, they are still nowhere. Those levels today, and changing slightly daily, are 1013 on the S&P 500 and 2015 on the Nasdaq. Many strong longer term markets can test all the way down to the 50-day exponential moving averages and simply blast right back off from there. It'll look terrible if we fell that far but technically there's no real long term damage until those 50's are a memory in the rear view mirror.

Step-by-step as we dance around this difficult game. The first red flag for the bulls would be a loss of the 50's but not a death knell. For now it's what comes first, above S&P 500 1080 or below S&P 500 1045. Until one of those breaks, very few, to no new plays, is best.

When I study today's move on Dow, I notice that the internals weren't nearly as bad today as they were good on yesterday's solid advance higher. We had 3-1 advancers over decliners yesterday on the Nasdaq, while today we saw 15-11 negative on the selling. That's not anything to get worried about to this point. If you’re a bear you'd want to see a strong decline-to-advance line with heavy price declines before thinking about taking out the 20-day exponential moving averages. When the advance/decline line is almost even on a down day, it doesn't exactly inspire one to go in all short.

For now we are seeing solid internals being more the normal than not these past many weeks, if not months. That too will change but for now it hasn't and that definitely needs to be respected for clues about when we may finally be topping out for good. Again, it could have already happened but the internals are yet to confirm that as a truth.

Look folks, let me blunt here. This market is screaming pullback, if you looked at the daily charts. Terrible MACD's, etc. It has found a way to grind higher and thus I'm not comfortable shorting until I see the right reversal stick. We may have already topped at 1080. That gap from October 2008 got hit at the exact 1080 high.

That may have been it. It may have been it for only some weeks or months. Who knows that far out. We may be able to grind higher but I have to warn you, that even if we do get to S&P 500 1125, we are very mature in this bull for now. We will have to continue to move along slowly. No apologies for what this market is. If you want aggressive plays, you need to be elsewhere. You won't get it here.

I am here to protect you when that's what needs to be.

Slow and easy will be the way here.

Decline-to-advance line.

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.

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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.

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