Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Celebrating Stock Market Bears Take a Major Hit

Stock-Markets / Stock Index Trading Oct 29, 2009 - 07:27 PM GMT

By: Jack_Steiman


Yesterday we get some strong volume and blow through the 50-day exponential moving average on the Nasdaq. We fall only a bit below on the S&P 500 (4 points) and hold above it on the Dow. We didn't have all 3 major indexes trading below the 50-day exponential moving averages and that's what you want to see if you believe the market is ready for deeper selling than has already occurred. In addition, you don't want to clear by as little as we did on the S&P 500 as that's not a true breakdown. 4/10th's of 1% is not sufficient to say it's all clear for the bears.

So we had a nasty day and the bears were celebrating, but we also had something else take place and that's the reality that we got massively oversold on the 60-minute time frame charts. Stochastics below 5, and RSI's below 30, as low as 22, in fact, on the S&P 500. These types of oversold are conditions you NEVER add new shorts in to. Some type of bounce has to take place to unwind the oscillators and we sure did get that today. The thinking was you could add shorts on any move higher.

However, after studying the charts, WLSH, INDU, COMPQ, PowerShares QQQ (QQQQ), OSX, PowerShares DB US Dollar Index Bullish (UUP). It's clear to see that any move back down will create massive positive divergences. It'll also take place at very deeply compressed MACD cycle levels. That's not the best formula for shorting. It's in all likelihood the place to take some longs, even if just for a trade or two.

This is a very complicated market that's giving absolutely no one any satisfaction and that's the reason for so little on our end in terms of plays. When markets can't find a true trend near term, it's best to keep things extremely light. Always a time for aggressive playing in time. Patience is the hardest part of this game and unless you have lots of it, you can't do very well, especially in markets such as the one we're in now.

So what type of market are we in exactly!

It's a mature move up for sure. The very best of things have been seen for now. There's the lure or desire for more and it's very easy to get too caught in that. Conversely, there's the lure of thinking that because the move is mature, we should just start breaking down. Nice thought. No reality! Markets don't break that easily folks. Not after such a long protracted move higher over eight months. Folks are trained to buy weakness. The desire to get the next leg up. Distribution out, a bull in, to a bear, if that's indeed where we're headed, can take many months.

Yes, I said months.

That's not unusual. If you all would think back to 2000, the market started to mature in late 1999, but didn't top on the Nasdaq until March 9th, 2000. It was roughly four months of distribution before the house of cards came down. And we may not be headed back in to a bear. That's very unclear. Just stating that if we are, you can not expect a crash right back down. If you have been, you've been extremely disappointed with the results and will likely continue to be so for some time. We are in a mature market that's either handling out waiting for the next move higher in time, or is maturing and distributing. That will become very clear in time. For now things are very unstable and volatile. A market where less is more.

The dollar has broken out of its wedge in a bullish fashion and is now in the process of back testing. If it's truly bottomed and if the market is truly topping, it should not fall back in to its wedge. If it does, it tells us that the move out was nothing more than a head fake and makes future moves difficult to trust. However, once a move like that fails, normally the next move will take a long time to happen, which, of course, would make our market that much more difficult. So far it’s held, thus we should see at least another move lower soon, but as I mentioned above, that move will open the door to strong positive divergences on the 60-minute time frame chart. Let's just say things aren't easy here. The dollar needs to be watched very closely here.

1047 remains the 50-day exponential moving average on the S&P 500. The small breach yesterday was a false breakdown. Until the bears can close this below this level by at least 1%, you can't trust the move with any real confidence. The Dow has yet to close below its exponential moving average at 9677. These levels can change slightly each day. 2083 is the number on the Nasdaq. The bears need all three of these major averages to close approximately 1% below those levels to feel they have proper confirmation. We know 1101 is the recent S&P 500 high and that will be incredibly tough here. We simply are trading between roughly those 50-day exponential moving averages and the recent highs on all the indexes with lots of head fake type moves to draw in your emotions. This tells us to keep things very light for now until we get some convincing evidence of what's to come.

Oh, and one last thing. Things change over time. Life is all about change. The landscape may have changed today, with that better than expected. Gross Domestic Product (GDP) number at 3.5% growth. It may not be real, or may not last, but that's not how we play. This is probably the reason for the large move up today and why any move lower will now set positive divergences.

Just another thing to keep in the back of our minds.



Jack Steiman is author of ( ). Former columnist for, 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!

© 2009

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

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

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