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Stock Market MACD Rally Off The Lows....

Stock-Markets / Stock Markets 2011 Jun 28, 2011 - 03:19 AM GMT

By: Jack_Steiman

Stock-Markets

The market staged a very nice rally today as those MACD's started crossing up positive over negative today. No news over the weekend, along with those crosses, gave the market a lift few expected as things looked very dire after the close on Friday. The one positive has been those oscillators on the daily charts, especially those MACD's. It's really funny how things have reversed for this market. Two months ago we were dealing with market highs on the belief that the economy was recovering thanks to QE1 and QE2. The negatives at that time were the two-headed monsters known as sentiment and those nasty looking weekly divergences. Now we have the opposite situation at hand. We have a falling economy, but we now have a two-headed monster that's positive for this market.


We have sentiment now on the side of the bulls as the bull bear spread has gone from 41.6% to 9.6% more bulls than bears. We also have those weekly divergences' negative played off as things have totally unwound there. Again, a real one-eighty turn. The good is now bad and the bad is now good. Tough to know which one ultimately wins. For now the bulls have done what they needed to do and that's hold above critical support and they've also put in a little distance away from 1249 Sp, the big line in the sand. A good day for the bulls but they are far from out of the woods. A baby step today but that's all it was.

A nice bid in the financials helped big time today. Some still didn't participate very much, but stocks, really dead stocks, such as Citigroup, Inc. (C) and Bank of America Corporation (BAC) participated in a big way today with BAC threatening to take out its 20-day exponential moving average at 10.91. It has been rejected time and again at this critical moving average, but it is now trying to do so with much better oscillators, thus, it has a real shot. If that could clear it could potentially move up to its 50-day exponential moving average. This doesn't necessarily mean anything special for this market. It just may be that we're getting one more move higher before things come tumbling down.

However, if you're a perma-bull and you want another bull market, this is about your best hope for now. You need to take baby steps, and getting dead stocks, like some of these banks, to move up above tough resistance would be at least a first step. The first thing I would suggest is not to get your hopes up too high, meaning don't get too bullish just because of today's action. Go slow and easy here for sure. The banks are always the big tell, so keep an eye on them and see if they can clear their 20-day exponential moving averages and move towards their 50-day exponential moving averages.

The commodity world got hit again today, even with the market moving higher, which tells me that deflation is the problem we're facing and not inflation as many are worried about. With Mr. Bernanke saying good-bye to QE2 on Thursday, it'll be very interesting to see just how far these stocks fall and whether the market has already priced in the worst of the move, or if a bigger move down is in the cards. They're holding support for now but really struggling to get off the dirt here.

When the fed was fighting deflation these stocks exploded higher without hesitation on an almost daily basis. The froth was completely out of control. Now they have the opposite situation to deal with as they are dealing with an unfriendly fed Governor. The bigger picture isn't that friendly wither as the fed now must fight inflation at all costs while the economy is slipping lower. Folks can't get jobs. Folks are scared and in that environment he must make sure things become more affordable for everyone so it's hard to imagine he will be commodity positive in the short- to medium-term.

Nike Inc. (NKE) had strong earnings after hours. It's good to see a big cap favorite report positive earnings, and for now, a positive future forecast as well. You know my big concern is a strong increase in bad earnings reports for this quarter as many got caught thinking things would be good economically. We have had some bad blow ups already in Oracle Corp. (ORCL), Adobe Systems Inc. (ADBE), Jabil Circuit Inc. (JBL) and Micron Technology Inc. (MU) to name a few. FedEx Corporation (FDX) and Nike Inc. (NKE) have been quite good. If the earning's picture can somehow stay positive we will have a nice surprise the bulls can hang their hats on, but I wouldn't bet the farm on that holding up. We can hope, but hope in the stock market can be a rough thing to deal with if you're wrong. Reality, thus far, has been mixed at best. A long earning's season is dead ahead, and if nothing else, it'll be very interesting. The bulls need a miracle there.

Support and resistance are clearly defined. The 20-, or sometimes, 50-day exponential moving average on the top is massive resistance, while the 200-day exponential moving average is massive support. When one of those moving averages get broken with force the market will see a more directional move. It's easy to say that we'll just break down, and with the pattern in place, you could make a great argument that this will end up being the case.

However, never count the bulls out. The daily oscillators are far more favorable than not, although, may be just a temporary situation. We could unwind up further only to see things crater out in time. For now it's still all about which breaks first, the 50-day exponential moving average on the top, or the 200-day exponential moving average on the bottom.

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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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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