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Stock Market Gap Up And Reversal...200's Holding So Far...

Stock-Markets / Stock Markets 2010 May 19, 2010 - 02:26 AM GMT

By: Jack_Steiman

Stock-Markets

The market had put in a doji yesterday but did not do so at a critical level of support or resistance. We got the expected bounce at the open but did not hold, which often happens away from those critical support or resistance areas. Less trustworthy to hold for a full day. Once the gap up got taken out and filled it was all down hill from there.


The bulls could no longer hold the fort as the bears gradually took over, stair stepping this market lower throughout the day. When all was said and done the bears had to feel good and the bulls had to feel somewhat defeated as they couldn't even make it back up to the gap at 1155 on the S&P 500. As soon as it got close the bears took over. You'd have thought they'd at least get the market back in to the gap but that was not to be on this day. Weak action by the bulls and solid action by the bears.

When a market gaps up from a down trend in place it offers hope to the bulls as they now would have some support just built in on that gap up. This is why today was so disappointing for them. They had their gap up and not only did it gap up, it ran once it did so. Good sign for sure. If the bulls want to have any hope it's critical they hold this gap, even if it fell back some late in the day. The key is to protect the gap but that wasn't the way things would end up. In fact, it only took a few hours in the morning to lose the gap which is really surprising.

The gap up was fairly strong and with that doji in place I just spoke about, it seemed likely the gap would hold for a longer period. Losing gap ups in down trends only confirms the bears are in control for the moment. If the gap up had held, the bears would have lost some of their grip on the down trend in place. With us closing dynamically below the gap up, the bulls showed they have nothing on the bears right now as things get interesting as we close in on the 200-day exponential moving average on the S&P 500 down at 1102.

Each and every day it seems we're losing more and more individual stocks to their own bear markets as they trade below their 200-day exponential moving averages then back test and then break down again. Many stocks are losing their 200-days for the first time such as Direxion Daily Financial Bull 3X Shares (FAS), the 3x ETF for the financial's. Goldman Sachs (GS), JP Morgan (JPM) and others are already in bear markets and now the FAS is making its first closing low with force below the 200's. The commodity world has been dealing with a bear market for some weeks.

These oversold stocks had nice gap ups today but they did what bear markets often do and that's to take much of their gains away. The Oil Services Holders (OIH), or the proxy for oil, gapped up huge but then reversed 5$ lower and finished red. Bad bear market action in that stock. the story was the same for the whole commodity world overall. Bad action off their gap ups signaling the bears are firmly in control. Stocks like GS lost its bear flag and broke down as bear flags usually do to a stock. A strong move lower as its bear market continues. Visa (V) and MasterCard (MA), two huge leaders, were sent in to their own bear markets a few days back thanks to Government intervention. Nasty days there as well as they trade far below their 200day exponential moving averages. Leaders are getting lost one by one. Interesting times.

The daily charts are not oversold. The stochastic's are averaging near 40 as are the RSI's and thus there is energy available to the down side should the bears have what it takes to bring things down. It's not as if we're looking at stochastic's down near 10 and RSI's at 30 or below. We're not even close to oversold on the daily charts so it'll be very interesting to see what the bulls can do to stop the bears charge towards the 200-day exponential moving averages. The short term charts get oversold then bounce a bit to unwind their oscillators before heading lower again. More of bear market like action. In bull markets you stay more overbought and whenever you get near oversold you bounce hard. We're not seeing that type of action at this moment in time. This needs to be monitored closely as we get close to those 200's.

Look folks, there are parts of this market that are in a bear. No denying that at all. However, the stock market is not in a bear at this time. Acting like a bear for sure but confirmed a bear which would occur only if we lost the 200-day exponential moving averages across all the major index charts and then only if we back test them and gap fain lower. Many stocks have already done that and some are posted for your viewing tonight. You can see how individual stocks go in to their own bear markets. Big names you wouldn't normally associate as being in a bear if the stock market itself isn't in a confirmed bear. We have much to watch and learn from in the days ahead but these are very interesting times for sure. Stay tuned.

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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