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The Real Secret for Successful Trading

Real World Says Hi To Wall Street

Stock-Markets / Stock Markets 2010 Aug 12, 2010 - 02:39 AM GMT

By: Jack_Steiman

Stock-Markets

And the real world was the words Mr. Bernanke, our Fed leader. Love his honesty, if nothing else. He said yesterday that interest rates would remain between 0%-.25% for at least another year, which means 2-4 years, if you read between the lines. This told the market that there would be no real economic growth for quite some time, and that deflation was the word for the next many years. Now we are all wishing for inflation. Funny how things change. Bernanke said inflation is not even a though any longer.


These are some harsh words when talking about an economy that's begging to find a way to grow. The Government keeps interfering and making things worse for everyone. Their political lives are on the line this year, thus they'll put themselves first and us last. That's why they keep interfering. If this was 2011, you wouldn't hear a sound coming from our leadership. It's 2010 so you'll hear lots of noise in the weeks and months ahead with stuff such as forgiving loans, etc. You will hear about tax breaks. The list will get deeper and deeper as things become more dire for the economy. It's the good old American way.

Stimulate and print until we drop, and fall over ourselves, as if we were drunk. In the end, this drunken state makes a bad situation worse. Stop trying to cure what isn't curable. Again, not the American way when politics are involved. Makes you want to know what. It's hurting and not helping, but it will continue. Mark my words on it. As the days go by you'll start to hear all kinds of stimulus prospects. Yesterday Mr. Bernanke told all of us to prepare for some very difficult times in the coming few years. Buckle up folks. The ride continues.

The futures started moving down the moment the market closed yesterday. Asia didn't like one word of what came out of Mr. Bernanke's mouth yesterday, and who can blame them really. I can't. Asia fell hard, then Europe followed Aisa, and that allowed our futures to fall precipitously. By the time the market opened, the futures were at their lows, offering up 100 Dow points to start the session. From there the question became, would we print hollow bullish candles or would we gap down and run, causing a trend down day. It didn't take but a few minutes to recognize what was at work today. Gap and run. Trend down day was the way it would be, and this caused huge full red candles, which took out huge amounts of gains over the previous three weeks.

We closed, basically, on the lows, but here's the key. It was on bigger volume with absolutely horrible internals, which gave the bulls no way to play spin doctor. Decliners led advancers by roughly 6 to 1 on the NYSE and by 8 to 1 on the Nasdaq. No denying full participation by the masses today. The majority of stocks took it on the chin. It wasn't led down by just a few players. It was led down by the masses, and that's confirmation for sure. Bigger volume. Huge number of decliners on a day loads of support got taken out is not good news bigger picture for the bulls.

When a market starts to break down you look at critical leading stocks to see if they fell hard, or held up, which would offer more hope. The answer to that is clear. The market leaders got ripped apart today. Even the very best of the best such as F5 Networks, Inc. (FFIV) took some chin music today. Apple Inc. (AAPL) was slaughtered. Cree Inc. (CREE) got hit big time. Amazon.com Inc. (AMZN) and Goldman Sachs (GS), both saw a down day today.

The list is very deep and in every sector of the stock market. Leaders led down instead of holding up as the carnage took place around them. Bearish action is all that can be said. When AAPL falls roughly $9 in a day, you know things have turned bearish. In addition, Nasdaq, or the leader of this market, had the worst performance of the big sectors, and this too, confirms today's selling as the real deal.

When we look at the areas of the market that have lagged the most, we see they were the worst yet again today. The financial stocks were crushed, as were those semiconductor stocks, which just can't catch any type of sustainable bid. They get anywhere near resistance and the sellers clobber them back down. The financials in particular have no excuses. They were set up to move higher in their patterns, but fell hard. Worst news was there was no attempt to catch at the bottom of bases, or hold trend lines. Like a knife through butter. No dice for the bulls in these under performing groups. Bad action continues where it matters most.

Sentiment numbers came out today, and they showed the worst possible news for the bullish case. Those extreme levels of bearishness are no longer upon us. The bull bear spread is now up to 14.2% more bulls, and this is not what they need for the moment. It was at minus 2% just a few weeks ago. It went par and then up to 5% more bulls. Now, at 14%, more bulls or a 9% increase in bullishness in just one week, there is nothing to save the bulls on this front for now. Sentiment has gone neutral. Bad news for the bulls.

So, now we watch 1080 S&P 500. If we lose that level, and it looks likely down the road, then this market can and should fall harder. 1060 is horizontal support, and then 1010. Nothing good here. Who knows what the market has for us down the road. Day by day, but for now we are not looking very good.

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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© 2010 SwingTradeOnline.com

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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