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
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
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
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 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

Stock Market Holds Support...Bounces...

Stock-Markets / Stock Markets 2011 Jan 25, 2011 - 02:05 AM GMT

By: Jack_Steiman

Stock-Markets

The difference between a bull market and a bear market is action such as you saw today. The overall market holds up, while froth stocks continue to mostly head lower and continue their correction off their most recent tops. The market is bifurcated and that's never great news. The Dow is well out performing while the Nasdaq is well under performing. That's simply because the highest froth and P/E stocks live in the Nasdaq. That won't be changing any time soon, thus, the correction to the down side should remain mostly in technology. That doesn't mean the overall market won't take a hit as well but the biggest damage will be in the land of technology.


Lots of overall back and forth will be the way for a while longer until the market can unwind deeply enough to attract more buyers. The Nasdaq has unwound to the upper 50's on its RSI, but the Dow remains very overbought. It would be best to get the Nasdaq near, or at oversold, while the Dow at least pulls back to the 60's, or the 50's, on its daily RSI. It won't be easy getting sustainable upside action if the Dow remains so overbought. For now you try to find good bases with lower P/E's, and be patient, meaning you may have to be in the hole a bit on your plays, but over time, the best patterns that align with lower P/E stocks should work out well over the next several months.

There are sector charts working their way towards support. Those supports are either key exponential moving averages or gaps. Doji's, or reversal candles, are taking shape at these areas of key support suggesting the market is still finding rotation in to other areas of the market instead of leaving the market when things sell off some. Out of one sector at overbought with bad divergences in to sectors printing bullish candles at those support levels.

This pattern has been in place for several months now and is showing no sign of reversing that pattern. You always have to be on guard for that reversal, but it has not shown up to this point in time. Never try to guess that things will become something. Right now there is no evidence that suggests anything worse than 1262 to 1257 on the S&P 500 in the near future. We can handle 3% or so down from here if need be.

The Nasdaq hit gap resistance at the top today. This is where it reversed and that's to be expected short-term for this under performer. That doesn't mean it can't get back through its gap at 2720, but the job will be tougher for this area of the market with regards to taking out big resistance levels. The S&P 500 and Dow, along with many other areas of the market, don't have gaps that big to work through. At any time the market could get hit across the board if the Nasdaq continues to under perform as it really is the overall market leader.

However, with this market really only correcting high froth, high beta stocks, again I do believe 1257, or within one percent of that level, should be the bottom area on any further selling, thus, get your long list ready. At that point in time, if we get that low, even the froth stocks will likely be ready for more upside action, even if they don't get close to their old highs. In bull markets you use weakness to buy the best set-ups, and this is the time to be readying yourself to do just that. Use this time of lighter playing to make that list.

There are no real weak spots in this market other than gold and silver for now. However, they are starting to get very oversold. They certainly could have more downside near-term, but even they are unwinding nicely. Stochastic's on many of the big froth stocks are getting in to the twenties and teens, and when that happens, you call off the dogs. The weakest areas are clear, but with them getting oversold, it tells you not to get aggressive chasing them lower, if that's something you have been doing.

The financials continue to hold up well and that's good to see. You want to see the laggard of the past many years hold up while froth winds down. The financials usually get dragged down with ease when anything else starts to sell, but that's not happening for now, and that's what we should be seeing in this type of environment. Slow and easy in this period of unwinding folks. Let the froth continue to be wrung out. Things will set up soon.

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.

Sign up for a Free 21-Day Trial to SwingTradeOnline.com!

© 2011 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 constitutinginvestment advice. Trades mentioned on the site are hypothetical, not actual, positions.


© 2005-2022 http://www.MarketOracle.co.uk - 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