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Stock Market Needs To Test Higher...MACD's Cross Up

Stock-Markets / Stock Markets 2010 Jun 04, 2010 - 02:34 AM GMT

By: Jack_Steiman

Stock-Markets

The late day action saw something important take place. Oversold MACD's crossed up positive, which tells me that we should be trying higher prices in the short-term. MACD's weren't crossing across the board, but the late action allowed for all the major indexes to cross up on the daily charts and that's near-term bullish thus shorting should not be your mantra short-term. If the market were to fall tomorrow it would set up strong positive divergences on deeper selling. Also that divergence would come from very compressed MACD's thus it would be best for this market to trend higher. Another excuse for the bears to step aside overall.


So now I said we need to go higher and we have MACD crosses, etc. Sounds super bullish. It's not. It's short-term in nature. If we can make the move higher we have all kinds of resistance levels hanging out above. We have 20- and 50-day exponential moving averages above current price. We have gaps above current price. We have trend lines above current price. In other words, don't expect the moon and the stars. Keep your emotions in check and realize that we should get some upside, but don't think in terms of raging bull market. Do not think in terms of long-term portfolios.

Think in terms of some light exposure that should work out over the very near-term. 1134 is the 50-day exponential moving average. That would be the perfect place for the right shoulder. 1150 would be a perfect symmetrical right shoulder but head-and-shoulder patterns usually have somewhat lower right shoulders. If we are lucky enough to get through the 20's at 1111, we have a very decent shot at 1134, but don't get those hopes up too high. After that we'd think about shorting. Get those MACD's to climb closer to the zero line and get them well off the bottom and we're thinking about shorts. The compression has to go away and then we're thinking shorts. One step at a time of course.

The only sector at the 200-day exponential moving average now is the S&P 500. It closed actually right on it but all other sectors are back above thus the theme of us being in a bear market doesn't work for me at all. This market has a lot of work to do to convince me we're in a bear market. Lots of negative sentiment out there these days. The longer a market doesn't behave well the faster things get negative amongst traders. The 11% spread of bulls to bears tells that tale. I'm hearing lots of negativity, even in places such CNBC and Bloomberg, which is really unusual. This tells me a bear market everyone is talking about as imminent is not quite that imminent at all. Possible, sure, but far from a sure thing. For now, we don't have nearly enough negative patterns in place to say we're in a bear.

One thing is crystal clear in an unclear market is that keeping it light is by far the best way to play things. You have to really enjoy pain if you're rushing in here with an abundance of shorts or longs. There are signs of improvement, but it's really more technically based than fundamentally based. Simply too compressed for sustainable downside, but there are too many global problems to think the waters are no longer full of sharks. The bears have to worry about getting too pessimistic here and they have to worry about things being oversold on the MACD's with crosses taking place here. Nothing, and I mean NOTHING, IS EASY HERE!!! In markets such as these it's best to be loaded up with cash. Some light exposure only. Please make sure you abide by that rule for however long it takes for things to become clearer.

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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