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Stock Market Bears Dismantling the Rally Step by Step

Stock-Markets / Stock Index Trading Oct 28, 2009 - 01:53 AM GMT

By: Jack_Steiman

Stock-Markets

That's how the bears will have to do this. There is no straight down free fall into oblivion coming to a bear market near you. Step by step as we take on each level of support. We get there and get oversold. We bounce. We fall again and we bounce Usually on the third try we get through, but we have so many levels of support close by it's hard for the bears to gain any real momentum. 1080/1074/1060/1047. An average of approximately 1% between levels of strong support. Not exactly what the bears want to deal with but that's the game we're playing here. What's truly amazing is that each level puts up such a strong fight. Not a single one just goes away on the first try. That's how strong this bull market is.


By the way, it is a bull market, even if you are a dooms day person thinking we're testing S&P 500 666 again. Don't tell me 50% is not a bull market. Don't tell me how much we fell prior to that move. Waste of time. This has been a fabulous bull but there are troubling flags out there as we start to move lower here off the top at S&P 500 1101. So, yes, it is painfully slow as we move down step by step, but for the bears, at the least the trend is now somewhat lower.

We started the day higher though Baidu, Inc. (BIDU) gapped down an incredible $80. The Nasdaq quietly lagged and the Dow led, normally not what you want to see. Safety first. High beta last. Healthy markets to the other way. Buy the high beta and forego the safety. The market gave up its gains as the day went on although the Dow held gains the best with the biggest losses seen on the Nasdaq. The Nasdaq held the 2116 gap while the S&P 500 held the 1060 gap. Both threatened to go away, but when you get oversold 60 minute time frame charts at the same time you get to big support, you don't usually continue lower. That's where we closed. At support and oversold thus you can probably expect another bounce here. It shouldn't last long at all but you can expect it. 1074 S&P 500 is now very difficult resistance thus a bounce up is where you want to short some.

We started the day higher though Baidu, Inc. (BIDU) gapped down an incredible $80. The Nasdaq quietly lagged and the Dow led, normally not what you want to see. Safety first. High beta last. Healthy markets to the other way. Buy the high beta and forego the safety. The market gave up its gains as the day went on although the Dow held gains the best with the biggest losses seen on the Nasdaq. The Nasdaq held the 2116 gap while the S&P 500 held the 1060 gap. Both threatened to go away, but when you get oversold 60 minute time frame charts at the same time you get to big support, you don't usually continue lower. That's where we closed. At support and oversold thus you can probably expect another bounce here. It shouldn't last long at all but you can expect it. 1074 S&P 500 is now very difficult resistance thus a bounce up is where you want to short some.

We have some big breakdowns today and over the past few days actually. You will see tonight in the charts (WLSH, COMPX, SPY, TRAN, DJUSRR, DJUSGC) exactly what I am talking about. The railroads are broken. The banks are broken. They are oversold and could back test but those wedges were big and long lasting and now they're gone. Bad news for those sectors and thus the stocks in them and in them we have some big time leaders such as CSX Corp. (CSX), Burlington Northern Santa Fe Corp. (BNI), and Union Pacific Corp. (UNP). The banking sector has also broken down out its wedge. Another leading sector which means other than bounces, these are broken vehicles. Even stocks like Apple Inc. (AAPL) proved they can actually sell hard along with Google, Inc. (GOOG), Priceline.com Inc. (PCLN). and others every now and then. Less stocks are participating on the up side now and more stocks and sectors are breaking down. It looks as if the next few weeks at least are going to be tough for the bulls.

The dollar has begin to rally and many will feel as if it's not for real and who knows for sure but it looks as if the worst is over for the dollar near term and this fits in nicely with the concept of a market more in sell mode than anything else. There are some very divergences on the daily PowerShares DB US Dollar Index Bullish (UUP) chart and from lower MACD and stochastic levels, which makes the odds higher that the positive divergences will play out overall. Not every day, of course, but overall. We need to watch the set up of the dollar to get a good feel for things.

The market has changed here folks from bull to correction. Will it become bull to bear? That's very unclear for now and not something we need to focus on or even spend a moment thinking about. It doesn't matter. We'll let the market tell us and whether the odds are increasing or not as things move along. We only know that the near trend is clearly lower with rallies every time we get oversold on the short term charts due to the high number of support levels close together. Day by day.

Peace

Jack

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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Jack Steiman Archive

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Comments

danepol
28 Oct 09, 14:23
1047

How does 1047 sound, Jack? Yes it will bounce up, but this was a cyclical correction in a secular bear market and hibernation time is over.


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