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Stock Market Bullish Pullback Starting...

Stock-Markets / Stock Markets 2010 Apr 08, 2010 - 03:20 AM GMT

By: Jack_Steiman


I truly believe that this market is only pulling back and setting up again for further gains. The selling should be sporadic. Nothing severe at all. So many stocks hit hugely overbought levels but for the first time many of them we're starting to flash negative divergences on their daily charts. When you add in negative divergences on many oscillators such as RSI, MACD and stochastic's, it's time to relax, take a deep breath and not feel any urgency to be buying any longer.

That has passed by and now it's time to watch how things set up on varying different time frames to gain some insight as to when we should be getting back in again. No rush at all but things will set up. It won't set up in a day so you'll need patience for sure. That we have plenty of after the last few months of gains. It's like the feeling you have after a large delicious meal. You're full and you know you need to wait before putting anything else inside your system. The big move up is over for the short term but the medium term still looks very promising. Hang in there and things will set up all over again.

We started the day with a small move lower with the Dow and S&P 500 leading down. The Nasdaq was clearly the strongest sector again as the appetite for risk was strong. The retail investor wants those stocks that fly. After being down as much as 70 points early on, the Dow rallied back strongly with the rest of the major indexes. The Nasdaq actually going green but the churn was back on. Ultimately the sellers finally caught up to the buyers and down we went again with everyone participating. Nothing spectacular but the start of some selling. we closed down decently although off the lows as one would expect where retail is chasing every move lower. Fear of missing and the joy of buying weakness too powerful to pass up on. Good day for the bears but nothing close to worth getting excited about. We should see more overall selling based on today's stick in the days ahead but not every day.

When you're in a confirmed bull market such as we are now it doesn't take too long to get the short term time frame charts to become buys because they rarely get oversold and if they do, they don't stay oversold too long. The daily charts aren't going to come close to getting oversold. They'll get bought long before that takes place. RSI's rarely get below 50. Anyone here thinking about shorting is playing against the trend. The market won't be easy here for upside action but I don't believe we'll see anything that puts the near term upside in jeopardy. A little break in the action is about all you'll see.

Earnings are trickling in and tonight we have Bed Bath & Beyond, Inc. (BBBY), a huge retail outfit that is exploding after hours. Great earnings and guiding higher. What would make this market reverse back down hard? Bad earnings, and based on the early reports, you're just not going to get that and the market is telling you as such by the way it has been behaving. The market anticipates things long before they actually happen. Sometimes the market does sell the news a bit but that doesn't mean the market is doomed. It gets sold because it's full. It can then handle out and go higher again.

We'll see if this occurs once we get in to the teeth of the earnings season about a week away. As long as the earnings stay strong and guidance is good, the market will not begin a new bear, even if the fed raises rates. Longer-term support on the S&P 500 comes in at the 20-day exponential moving average. That level is now 1165 and rising slowly. Even if we breach that some we get the mother load of support at 1151. This market won't collapse. Will be buying again before too long.



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.

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© 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.

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