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Trading Any Market

Stock Market Holds 20...Handle In Place.....

Stock-Markets / Stock Markets 2010 Apr 30, 2010 - 01:44 AM GMT

By: Jack_Steiman

Stock-Markets

The market decided not to follow through on the downside once it had successfully taken out those 20-day exponential moving averages on the daily charts on the S&P 500, Dow, and WLSH. The Nasdaq never did lose its 20-day moving average on a closing basis. Only intraday. Once lost the market decided to rise yet again, and get all of the important index charts back above those critical 20's, although they're not nearly as critical in terms of support as those 50-day exponential moving averages. Understand that handles mean up and definitely down and we could fall right back below those 20's yet again.


In fact, we could rise up and fall down many times through those 20's. Yo-yo may be the way for quite some time. We could even go down as low as those 50-day exponential moving averages and create a deeper handle that goes as low as the 50's which right now is 1169 on the S&P 500, a full percent below the current established range. Remember, it's normal and healthy to test those 50's. For now, however, the market bears are struggling hard enough with eliminating those 20's and that's their first order of business from their perspective. Today they failed and the bulls succeeded in taking things back but please understand that handles are similar to yo-yo action and that at on any day we could lose them again. Nothing is that secure right now in terms of holding.

We started with a gap up today that churned a bit, but eventually started to run higher as the day progressed. Once the 20's were taken back you could feel the bears lose their grip on things for the day. Not saying permanently but you could feel the day being a give up for the bears. One thing that took place today from a technical view are the daily charts. If we look at the daily charts of the S&P 500, Dow, and Nasdaq, we could have seen that the stochastic's had already unwound quite a bit along with the RSI.

In this market, that has equaled an advance almost every time and today did not disappoint. Once things unwind from overbought to neutral or near oversold the buyers come racing in and today was no different. Buyers who have missed things or buyers who just continue to want to get in on all pullback's simply rushed in. Solid overall action today in this ongoing bull market that everyone is waiting for to end these days it seems. For now there is still no evidence suggesting things are about to reverse to the point of establishing a new bear. Not even close. Today was further proof of that based on price action alone.

We are seeing the same bullish events day after day. Yes, some stocks are breaking down and some severely so, but money continues to rotate all over the place. If it's out of commodities one day it's back in a week later. In the meantime, that money then goes to banks or biotech's or transports. The point is that money is not leaving the market but finding new homes when one sector gets too overbought. As another sector gets oversold the market finds new money there. I watch this closely to make sure we're not seeing distribution take place quietly signifying the end of the current trend is coming soon. For now there is no evidence to that reality either.

Please remember that handles are very emotional and thus expect strong up days as well as strong down days in the weeks ahead. If we break out over 1220 S&P 500 then we have a real breakout once again but it will print negative divergences thus it would be best if things unwind further. A breakout with negative divergences create a strange dilemma in that you have to decide whether to chase it or not with more plays. If you do, there's extreme risk that the breakout will fail. If you don't, you feel bad about not participating further. We'll cross that bridge should we be forced to. A deeper handle would be best for all of us. Day at a time. Please go slow here and I would advise no new plays for now. Let things set up in time.

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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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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