Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Sentiment At Extremes...Nearly Inverted...

Stock-Markets / Stock Markets 2011 Sep 08, 2011 - 02:36 AM GMT

By: Jack_Steiman

Stock-Markets

I started speaking about this phenomenon last week when the bull-bear spread got down to 4.3%. It was 7.6% the week before, and I must admit, I was surprised to see it drop to that 4.3% level. Then today the sentiment figures got even more bearish on the spread. Only a 1.1% spread between bulls and bears with the bulls at 38.7% and the bears at 37.6%. When levels get this low, and it is unusual that they do, getting sustainable downside action is not easy for the bears any longer. That doesn't mean there won't be down days because, of course, there will be. Some will be nasty. It just suggests that sustainable downside action will become far more difficult as the bear trade is full. When the bears are all in it gets too tough to kill the market. No different than when the bulls go all in. Upside action becomes more difficult. The bull-bear spread can invert negatively but that is rare.


The fact that it's only at 1.1% should put the bears more on the defensive for a while. It doesn't mean the market blasts off. It probably won't. It just means that weakness can now be bought some. If the market can move laterally over the next several weeks to months, the sentiment should start to unwind itself. More bulls will come in, and fewer will remain, or get bearish, when the market doesn't break down. The longer the market holds up, the more likely it is that some will switch from neutral to bullish or from bearish to either neutral or bullish. That's when the opportunity will be there again for the bears. It'll be tough before that happens. Simply said, I'd lose some of my bearishness for the very short-term, but I wouldn't get overly bullish either.

I think the most interesting thing I am finding when I search through stock after stock and sector after sector is the fact that there are daily positive divergences at the most recent lows. They're literally everywhere, including the semiconductor stocks and the financial stocks. The divergences are large as well. Not just tiny, but large, and well below the zero line.

There are gap ups that held today, which confirms the divergences, and that, too, is near-term more bullish. Sometimes those divergences just don't kick in when you're in a bear market. But they sure did today. After some selling to unwind overbought short-term charts, those stocks should move higher in time. The gap ups are key, and they did hold today with relative ease, thus, the bears are in a bit more of a box for only the very short-term. Divergences at the bottom often allow a stock to slowly grind its way higher in a fashion that can often disappoint. You grow impatient but over some weeks the move emerges. Don't lose sight of that should things pull back some. It's quite normal for sure. It's a big positive that the financial and semiconductor stocks joined in the divergence gap ups today. Across the board is better for the bulls short-term then if only a few sectors did the trick.

The President is going to be speaking tomorrow night with his new plans to help stimulate the economy by creating jobs. He will speak of payroll tax breaks and help for the unemployed by extending benefits. He will throw in many other things to help stimulate. The truth is he has tried unsuccessfully as have both sides to do anything to get this economy going. This is probably because the debt situation has left them all in a box with nowhere to turn. It's a sad reality to see years of climbing debt and the excesses caused by Mr. Greenspan in the late 1990's and early 2000's. We're still paying and will likely do so for many years to come unfortunately.

I don't know how the market will react to this speech Thursday night. But you have to play more on what the market internals and technicals are saying than anything else at this point. I think the market has figured it out by now that there's not much anyone on this planet can do to help our current situation. Maybe we'll be pleasantly surprised, but I doubt it. It's no one's fault at this point. Everyone's trying. It's just that the past has caught up with the present. It'll be interesting to listen to, and more interesting to see, how the market responds. I wouldn't expect much.

Massive resistance runs from 1235 S&P 500 up to 1260. Strong, powerful support runs from 1165 down to 1130, and again, down to 1101. The market is in a bigger picture bear flag that will likely extend out for several more weeks to months. There's nothing wrong with that if it unwinds the sentiment issues and gains are contained if you are approaching the market from a bearish perspective. If you're a bull, you'd do anything to take out 1260.That would change things around quite a bit.

But I can promise you that won't be anything near easy to do. The bears would fight harder than you can imagine if we ever got anywhere near that level. The sentiment issues, along with those nice divergences on those daily charts, won't likely allow for any major breakdown, but those bad economic reports won't likely allow for any major breakouts. Range bound in a bear flag that may extend a bit higher is likely on the docket. The premise in now more in the buy weakness camp until the divergences are worked off along with sentiment

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 constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.


© 2005-2019 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