Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

High Pole Stocks Snap...

Stock-Markets / Stock Markets 2010 Oct 07, 2010 - 04:42 AM GMT

By: Jack_Steiman


You won't have to look long or hard to find carnage wherever you turn with those high pole stocks, meaning stocks that have run up straight with hardly a pullback for months. They're all over the place, and we warn you to stay away from them daily. Not only have they run straight up, but many of them have incredibly high PE's that are simply unsustainable. 100 PE's and sometimes 200 or more. Stocks such as VMware, Inc. (VMW), Equinix, Inc. (EQIX), (CRM), and F5 Networks, Inc. (FFIV) to name just a few of the carnage hits today.

You never know when those stocks are going to take a massive hit, thus, the lesson here is simple. Stay away from them as much as possible, even though they are without question, the sexy stocks of the world. You always feel bad when you miss them going up every day, but the rubber band always snaps at some point. And when it does, it gets very bad very fast, and thus, you always have to be on guard if you do get in. Keep stops very tight and hope you don't get caught on the gap downs that took place in a few of them today, especially EQIX. That really is a sad story for anyone involved, and can happen at any time when your PE is in the clouds.

That's why it's best to always think of this game in terms of singles and doubles, and lose the home run mentality, as it often leads to bad news. We all make the mistake of going there once in a while but maybe the ultimate lesson is don't go there at all unless it's super compelling. Even then you have to tread slowly. The rubber band snapped in a large way today and this may have very short-term ramifications on the S&P 500, making it through 1160. More on that in a bit. Bottom line is the action on the Nasdaq was terrible today, due in large part to the big swoons down on the high pole stocks. The rest of the market held better.

When the high pole stocks finally snap it can often take some weeks before all the selling is done. These high pole stocks have been the best leaders throughout this rally. At best they need to get oversold and then form some type of handle to build back off of. Now, there is the possibility that they've seen their ultimate tops, and that will make things more difficult for the bulls going forward. It will require a new set of leaders to step up and keep things going to the upside, or the market will simply pull back in its current trading range.

Another test may be needed down to 1131, or possibly lower before the market try's once again to make it through 1160 on the S&P 500. We all know how tough this level is, and it will not be easy for the bulls in terms of getting through. The bears attacked the high pole stocks and got what they needed short-term. The battle will continue in the days ahead.

On the positive side of things, many Dow stocks performed very well such as (MMM) and General Electric Co. (GE). Great moves that show us there are still stock leaders out that can take over if need be. They'll need to if this market is going to break out short-term. This market is not dead because of the snap in many stocks today. Some of them are now at, or very close to. 30 RSI's on their daily charts with stochastic's falling below 20. They will get support shortly.

It feels really bad when these stocks get hammered, but there are a lot lower PE stocks, such as the two I just mentioned, that carry heavy weighting, and thus, the market is far from dead, although it probably feels that way to many. The financial's and semiconductor stocks continue in mostly bullish patterns for now after lagging for quite some time, so don't give up just yet if you think the S&P 500 can take out 1160 in the near future.

Lots of great bases continue to set up all over and that's a good sign. Now, it is possible that these good base set-ups can reverse down, and that's the end of it. The long-term down trend line being the top, and that's all there is folks. The bears have the burden of proof here in taking away and eliminating these base set-ups. It can be done, of course, but the bulls have the patterns.

Now the bears need to do damage so as to crush the hearts of the bulls. If these pattern set-ups become continuation patterns in the end, the market will break out. The oscillators are not bad at all, but some daily index charts are a bit overbought. We could sell back down a bit and then try again, but it is relevant to recognize that the patterns overall remain bullish on the daily charts. It's still all about 1131 to 1160, with 1113 now the line in the sand along, with 1115, or the 50-day exponential moving average. Day to day here.



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.

Sign up for a Free 21-Day Trial to!

© 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 shoul

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in