I will say it over and over. There's nothing bullish going on. There's nothing bearish going on. What there is is a market that wants to work off incredibly overbought conditions for a while to come so it can gain momentum to move higher once again. When you're overbought on the daily oscillators for months straight, months are going to be spent to not being overbought on those oscillators. It's as simple as that folks. We are not going to get overbought again just like that.

It's going to take a very long time before the market will have the ability to get overbought on the daily charts once again. There's usually as much time spent unwinding as there was at overbought, if not longer. I am not saying you get oversold on those daily charts as long as you stayed overbought. It's just that you'll spend a lot of time at the neutral level. The longer you stay neutral, the more you get people to give up, and the more you unwind those oscillators.

There's nothing bearish about the process, although, it can feel very bearish because upside is not sustainable. Folks are greedy. They want continuous upside all the time. No exceptions. Take away the candy store and they pout. The more they pout the more bearish they get. That's the necessary medicine for this market. Things can still go much lower from here before the market finds the bottom of its base to meander about in for weeks to months after that. Buckle up, if you haven't already, and enjoy the ride, even though, it'll be boring and frustrating. Bigger picture it's a good thing.

Fed Bernanke is on watch next week as they have their latest announcement about interest rates, and the health of the economy. Will he spend any time talking about the next QE program? That's what the market will be tuned in to next week. Also, the market will want some deeper clarity about his wavering on how long interest rates will stay as low as they have been. Will he waffle about some more, or will he be firm for once? He originally said no upward spike in rates until late 2014, but once he saw oil, and other commodities, blasting higher, he said, let's make that late 2013. Big change.

He might, once again, lean towards 2014 late, because of how badly the most recent economic reports have been. There appears to be a real downturn in them as evidenced by the bad number in new jobless claims the past two weeks, and by the terrible growth number from the Philadelphia Fed this week. The economic reports have definitely been on the decline this past month. The market had been trying to decide whether its real, or just a one time event. It's starting to look more real, but it can always turn back up, as we know. His words toward a QE3 program, or not, will be first, however, on the minds of traders. They want to know the economy is protected, if need be.

When markets get into lateral mode, or spend time trying to form a large base from which to trade in, it becomes more and more apparent that this is the process taking place. It's apparent by the lack of new breakouts. That's usually not permitted in any heavy dose as the market is trying to unwind oscillators. Breakouts accomplish the opposite, thus, we are seeing fewer and fewer stocks in bases allowed to actually break out of them to the up side. They get close many times and it seems like it's coming only to be disappointed in the end.

They simply continue to cycle around in their bases, and do get on your last nerve, so to speak. We think, here we go, only to say, here we don't go. Then you have to deal with them moving back down in those bases. The frustration escalates. You simply have to recognize what's taking place, and hopefully that can keep you calmer about why stocks just won't make the big move. Patience is the name of the game for a while to come, like it or not.

The base is still forming, and with massive support at exactly S&P 500 1340, it would not shock me to see the market gravitate to that level in the coming days and weeks. It doesn't have to, but that level would create a much broader base from which to trade, and thus, makes more sense technically. Stocks, like Apple Inc. (AAPL) and Priceline.com (PCLN), are continuing their pullback's and appear to need more time. Apple has earnings after the bell on Tuesday. There is real risk they are to the down side, unless they report perfectly. It could happen, but it better be perfect.

If Apple fails on Tuesday, it could be the catalyst to get us down to that 1340 S&P 500 support zone. 1422 remains huge resistance that we're not likely to see for some time to come. A day at a time, with the two big events next week being the Fed and Apple earnings.

Have a great weekend and enjoy your lives.

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.

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.

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

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.