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Stock Market Consolidating...

Stock-Markets / Stock Markets 2012 Mar 22, 2012 - 01:29 AM GMT

By: Jack_Steiman


There's nothing wrong with the market consolidating. The consolidating would be even more beneficial if it did this for another month. However, it's unlikely that it will. As we've seen, this market has been tough to sell short-term. There are very "itchy" buyers, once the market does any type of small pullback. People want to get into the market that has been in before, and people want in the market that has missed it altogether. Some people just have a real inclination to be in the market as interest rates are simply too low for anyone to do anything else with their dollars. Why fight the tape is what they're thinking. While it seems unlikely from a fundamental point of view, the market understands something we don't for the time being. The energy of the stock market is a lot smarter than our collective intelligence. Let the market do the talking.

Your job is to do all the listening. Don't let the emotion of what you think should be, get in the way of those pretty base set-ups, and other nice patterns in place, or getting close to being in place with just a little more selling. The market has sent its message, and the theme hasn't changed. The Fed Bernanke said let it rise and it's rising. The Fed said I need a higher market, and I will do whatever it takes to get a higher market over time. Fed Bernanke knows he's at the controls, and he understands the power of his words. He'll make sure the market is full-speed ahead for as long as he needs it to do so to try and heal an ailing global economy.

Fed Bernanke, and some of his brothers-in-crime, decided to change the status of interest rates just one week after promising lower interest rates through 2014. The talk is now about a small increase starting somewhere around the end of 2012. Nothing from nothing really, but this was Fed Bernanke's way of trying to cool off commodity prices, which are running higher in a way that clearly does not make him happy. To say inflation is not bad, because a car is not rising in price too fast, or that washing machines are not too bad, is nonsense. The things we use every day, such as energy, and food, are out of control. He's doing what he can to get those prices down a bit. So he talked up the need to possibly begin raising interest rates very slowly two years faster than he promised exactly one week ago.

It's really just an excuse for the market to try to sell a bit, but he knows the market will handle this news, and that only the commodity sector will take a small hit. He's more than fine with that. The majority of the market sectors are yawning this news off as they should. It will take some time to correct the damage done to those commodity stocks, however. The Fed is simply trying to control the one major bug in the system, known as inflation. You pump in the money day after day, and that's the results you get. Massive inflation. So now the Fed is trying to knock it down a bit.

The market spent much of the day in the red, except for the Nasdaq 100, which is out performing, but still very overbought on its daily chart. It could really use a break. The short-term 60-minute charts have sufficiently unwound from overbought, but the Nasdaq 100 daily chart could use an extended break. Not sure how much we get, but a few weeks off for good behavior would be a positive for this market. It would reset things, and allow for more energy needed to break out further in time. The Dow and S&P 500 are not overbought on their daily charts, but the S&P 500 is close. The mid- and small-cap stocks are also not overbought, but again, a break lower would help the whole market unwind things for better set-ups over time. Patience is needed as the process is under way.

Massive support comes in at Dow 13,000 and S&P 500 1370. A back test, especially of the S&P 500 at 1370, would be great news for everyone concerned. A slow move towards that level would also serve up to bring in some nice pessimism. Not that there's a problem, because there isn't, but the more pessimism I hear, the happier I am in knowing that things will once again move higher. 1410 up to 1440 is strong resistance on the S&P 500, and again, 1370 is critical and powerful support. Be patient here is my best advice to all of you.



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.

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© 2012

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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