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

Stock Market Consolidating...

Stock-Markets / Stock Index Trading Feb 23, 2010 - 01:40 AM GMT

By: Jack_Steiman


It's important for markets to consolidate a strong move whether that move was higher or lower. When you get a quick move up such as we had, you get some very overbought short-term 60-minute oscillators. These short-term charts tend to being to unwind their oscillators fairly quickly once they get oversold or overbought. This last move up caused some very elevated MACD's, stochastics and RSI's. The inevitable move lower had to come and today we saw a drop of that take place late in the day. Nothing much to talk about although it should sell a bit more. Unwinding can take place with more of a lateral move.

It doesn't have to be a strong move lower and although you can never say never, I don't think we'll see anything too terribly hard to the down side as things unwind. The market has a bid now that the 20- and 50-day exponential moving averages have been taken back by the bulls. It's always more fun when things go straight up if you're long such as we are here. However, let me remind you that some selling is healthier than not because if you stay too overbought for too long, the move lower will be much harder and occur much more quickly without much warning at all. When you don't receive much warning the tendency is to react more emotionally which almost always results in a poor exit price. This is fine just the way it is and some additional lateral to down side action would be ideal.

We gapped up this morning but were simply too overbought thus we started to struggle with further upside action once the trading began. The sellers finally caught up to the buyers allowing for the market to sway between small gains and small looses throughout the day. The bears tried a few times to take things down with more force but every dip was bought. Late in the day, with about fifteen minutes to go, the bears took the market down to their intra day lows but that too was bought up right before the market posted its last trade. All the major indexes finished in the red but barely so. However, if you study those 60-minute charts, the bulls accomplished some good oscillator unwinding making today flat for equities but good for removing part of the overbought problem. It shouldn't be all of it but it was a nice start. Lower oscillator readings would be far more ideal for the bulls.

The banks and financials held up very well today, which was necessary for the bulls since many other key areas of the market did not hold up nearly as well, from technology stocks to commodity stocks along with a few other key areas. The market continues to find a way to move money around to hold things up instead of it flying out of the market completely. This has been a trend overall since the March 2009 lows. Every attempt to bring the markets down has found rotation except when we finally had our one correction. Everything in between has been one of rotation and not a mass exodus out of equities.

If we study the market carefully we see something interesting has taken place since this latest rally from below the 20- and 50-day exponential moving averages began. Instead of money flying in to the old guard leaders such as Apple (AAPL), (AMZN), Google (GOOG) and others, it has rotated out to stocks that under performed before that rally. These leaders were up on a high pole and need to rest thus their relative under performance over the last many weeks. The stocks that were killed and formed divergences at the bottom of their wedges have been bought up.

This is great behavior because if the market rally is led by the same old guard and the rest of the market doesn't participate nearly as well, the rally is doomed to fail. Here we see a nice catching up from stocks that didn't do so well when stocks like AAPL were up every single day no matter what type of market we were in. Again, solid behavior and thus suggests we should go higher again and when we do, it would not shock me if this process continues although you will see the Apple's of the world get involved again for sure, just maybe not as intensely as many are used to. They'll perform for sure but it'll be good to see the whole market join the party.

60-minute charts have seen RSI's go from the low to mid 70's down to the upper 50's on average. Stochastics have gone from near 100 down to the low 60 region. So far so good and yes, we could use deeper selling to unwind more but it's already starting to get a bit interesting. Stochastics in the 30's and 40's with RSI's near 50 would be even better for the bulls thus let's hope we can get there. You may not see the classic oversold that often comes with normal pullbacks due to the market having more of a bid again but I’d really welcome stochastics down below 20 and RSI's in the 30's. You can't count on that so you have to be ready soon for more plays. Impossible to time perfectly so we may enter a bit early but things are soon to set up again.



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 21-Day Trial to!

© 2010

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.

© 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