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Stock Market Week Of Overall Selling.....

Stock-Markets / Stock Markets 2013 May 25, 2013 - 04:58 PM GMT

By: Jack_Steiman

Stock-Markets

Finally a bit of selling. Nothing to write home about if you're an ardent bear, but at least you have some lower prices this week for the first time in quite a while. The bears didn't do anything in terms of taking out any major support, which will be their goal in the days and weeks ahead, but for now, they've at least stopped the upside bleeding that have their short positions in a lot of pain. The real question for the bears now that we look back on the week that was, is did the Fed Bernanke really say anything relevant to their bearish case, or was the selling really more a function of overbought daily and weekly index charts? The answer to me is clear.


Overbought with high bull-bear sentiment readings took the market lower and nothing else. The market can always use whatever excuse it wants when it's time to sell some and that's exactly what took place. It really was time to sell a little bit folks. 70+ RSI's on the daily and weekly charts can't stay that way forever so we saw the bulls reign it in some as they're supposed to at certain times. The Fed said nothing everyone already knows. We all know that he would stop the liquidity madness if the economy improves dramatically. That's not news. So, in the end, the week showed some weakness due strictly to overbought daily and weekly oscillators, along with too many bulls to bears. Nothing more and nothing less. The unwinding has at least started. Nothing amazing to that end but a start. We have no idea how far this can run.

Once again I turn your attention to Apple Inc. (AAPL). A very interesting stock to watch because it is a very heavily-weighted stock that absolutely refused to fall this week even as the Nasdaq pulled back quite decently. It is right at the 444/445 breakout level. One gap up and its gone. It tried to break out during the week but the heavy market selling stopped the move. You get the feeling that the next time it breaks out, if it does break out, it keeps on running. If that happens you have to wonder just how much selling we're going to get because AAPL is capable of carrying an entire index due to, again, it's heavy weighting.

The bears need to focus their attention on this stock more than anything else. If you watched this stock the past week or so as it has tried to make the move, you can see the overhead supply at this 444/445 level kicking in to keep it from breaking up but at some point that supply will disappear so the bears better get rocking on this issue and do so now. If AAPL goes the market may try for new highs, yet again, which in truth is not healthy for the bulls. But we shall see what the bulls do with AAPL and what the bears do to stop it.

This is the first week in a very long time when the red flag went up regarding sentiment. It's getting dangerously close to the 40% level which is basically the get out of the market reading no bull ever wants to see. When you get to 40% or a bit higher the market doesn't just pull back. It gets smoked and does so for quite some time. This is why it would be best for the market to at least take a pause. Even if it doesn't blast lower on price, if it can just whipsaw folks around without breaking up again, it would start to annoy the bulls and get them to become somewhat more pessimistic. I would love to see the number get back in to the 20's again, but at least get it below 35%.

So for now the market, due to its bullish behavior, has the moving averages aligned properly meaning the lowest exponential moving average is above the next one and so on meaning the 20's are higher than the 50's with the 50's above the 200's. That's how bull markets work. All of the indexes are trading higher than their 20's, thus, the first real test for the bulls and bears is to see what can be done at those 20-day exponential moving averages. The bulls want to hold it and will fight there while the bears want it below so they can at least make a run towards those 50's. If you get down to the 50's the bears can at least start to dream. If we're above the 20's there are no dreams available. We came close to testing those 20's this week. But, thus far, the bulls are holding it just fine.

The market would be best served if we lost those 20's, but time will tell and again, a lot depends on AAPL short-term. Let's go over those 20-day exponential moving averages on the key-index daily charts. All of those index charts closed above as of the close today. The numbers are as follows: S&P 500 1634. It hit 1636 on the lows today but closed well above. Dow 15,130. It hit 15,199 today, and finally the Nasdaq is at 3420. It hit 3429 today at the lows. Close across the board but no cigar for the bears. In time they must close the indexes below, and then they have something to celebrate. For now we watch and learn.

Have a great and safe Memorial Day weekend.

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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