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Stock Market Doji late...

Stock-Markets / Stock Markets 2010 May 18, 2010 - 01:58 AM GMT

By: Jack_Steiman


Which simply means that there should be some relief short-term for the market but expecting too much is probably not a good idea since we have some very strong resistance a little more than 1% above closing prices. 1155 is the gap down on the The Standard & Poor's Depositary Receipts (SPY) from a few days back and then there's also the trailing lower 20- and 50-day exponential moving averages at 1164/1165 respectively. 1155/1165 will be very tough in the short-term for the bulls as we whipsaw all over the place on what is seemingly a daily basis. The charts tonight show clearly these ranges we are stuck in.

They do have some spread to them meaning they're about 6/75 apart and thus there's plenty of volatility. In the best case you want to short up at resistance or go long near the 200's if a doji or reversal stick prints to confirm the 200's should hold. We didn't get close to the 200's today on the selling, 25 away but we did print a doji as I stated thus we can expect some attempt higher. The market is not easy to trade in between these critical support and resistance areas.

There are now more and more stocks trading in bear markets. The majority of them are in the land of commodities. United States Steel Corp. (X), Oil Services HOLDRs (OIH), iPath DJ-UBS Copper TR Sub-Idx ETN (JJC), CurrencyShares Euro Trust (FXE) and on and on in that area. What is interesting is that we are now seeing some financial and internet stocks join in. Google (GOOG), (PCLN), JP Morgan Chase (JPM), Citigroup (C), and others. More than a bit interesting.

It does not mean we are headed for a bear market overall but it is a heads up. There can be many markets going on at the same time.

However, this is a change of trend that we haven't seen for a long time. We had commodity stocks quite healthy and there were basically no major internet or financial stocks trading poorly. The problem is that many of these leaders now have gap downs in their bearish patterns and are going to need some special news to take out those gap downs on back test failures of their 200-day exponential moving averages. They are not pretty technically, but of course, can repair themselves, but the bottom line is that their action is bearish in nature.

Sentiment is ramping up for the bears. It seems very few folks think there's much hope for this market any more. The tone on all the financial channels has turned bearish. It doesn't take much does it to turn things from overly bullish to overly bearish. A few more weeks of this type of market action should have the bulls only ahead of the bears by single digits. Was just 37.3%. How fast indeed.

My guess is on Wednesday we will see the number down in the teens somewhere from 22.5% this past week. Now, of course, this doesn't mean it's impossible to have a bear market for a while with low bull bear spreads, but you don't really ever see that. It's rare, indeed, but you never say never in the stock market. It feels ugly now and no one feels good about this market and that is some very good news for the bulls.

We are in a trading range for now folks. The question is whether this trading range is a precursor to a breakdown that many feel is now in the cards. We can, and probably will, trade within this confirmed range for some time between the 200-day exponential moving average at the bottom (1102 S&P 500) and the 20- and 50-day exponential moving averages at the top (1165/1164) respectively). Breaches can be expected as well. If the S&P 500 breaks this 200-day convincingly then there will always be the back test that all stocks go through. That back test should fail with a strong gap down as many stocks have that are in a bear market right now.

There is much to be learned in the days and weeks ahead but don't write the story until it is written. A bear market for stocks is not a guarantee. Just look at the hopeless feeling many have right now. People are hating stocks again. Patience as we watch all of this unfold. The best way to play this is to have mostly cash as your position. Some plays as they appear once we get to the 200's or to the 20's/50's. We're in between right now. Can't force a market. Day to day for now.



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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20 May 10, 04:41
Stock Market Doji late..

My guess is on Wednesday we will see the number down in the teens somewhere from 22.5% this past week. Now, of course, this doesn't mean it's impossible to have a bear market for a while with low bull bear spreads, but you don't really ever see that. It's rare, indeed, but you never say never in the stock market. It feels ugly now and no one feels good about this market and that is some very good news for the bulls.

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