That's what the market needed and that's what it got today. Some selling that helped unwind things at least a little bit and every little bit helps when you have a combination of events that tells us the market could use a break. We had overbought RSI's on the daily index charts. We had elevated oscillators such as those MACD's and stochastic's. We had a high number of bull- to-bears coming in to this week. Some selling would help things on many fronts for the bigger picture bull market. This began last night when the futures were quite nasty heading in to the pre-market hours.

They improved some as the morning wore on but once open, the market fell quite hard, being down close to 200 points at the lows in the morning before recovering some as the day went along. This was a day where you didn't want to see the market go green because it would just shoot those oscillators and overbought conditions right back in to play. Sometimes a market needs a rest and today was one of those days. After an up-day yesterday the bulls were not able to follow through and to that we can be grateful for as it allowed some air to come out of the market. needed release for sure.

My hope was that the news from last week in terms of the down side action would allow the bull-bear spread to come in some. It was approaching a very dangerous level heading in to last week so it was important for some of that bullish behavior to be wiped out. The week started at 36.4%, and thus, was approaching the get out of the market 40% level. Fortunately the market did see some downward action last week and we also saw the bulls come in some while seeing bearishness expand a little bit. Getting close to getting back over 20%. The actual spread is now down to 32.3% more bulls. Not a great number for the bulls by any means, but a whole lot better than 36.4% and also thankfully we didn't head towards 40%.

The key is the action this week and today was a good start. A down day, which only adds to some deeper pessimism. That's what we want. That's what we need. A week full of disappointment overall would go a long way towards getting that number back below 30%, which would make this writer feel a whole lot better than he did going in to this week. The longer the market struggles the better the number will be, and remember, we don't need a deep pullback at all. If the market simply struggles for sustainable upside action for any period of time the bears rock in. If we do get a deep pullback, the number will drop precipitously, and the market would be in great shape from a sentiment perspective.

Look folks, you can't be taken by surprise if we fall a few percent further back to some strong areas of support such as key moving averages and gap. Markets feel one way for a period of time and then very quickly can feel like something else entirely. That's why the game can be so tough on people. Within a big picture situation you have to recognize what's taking place and not act against how you should. That said, it's not easy to behave the way you need to. When it comes to your money you can act out of fear without seeing what you need to, but that's also why I say that in environments such as we're in now, you keep it lighter and exercise patience.

The whipsaw is getting powerful. Up decently one day and then down just as hard or harder the next. Black candles and hollow candles abound. Very confusing. The market is more violent now, and thus, if you play too hard you will suffer the consequences. Every market changes, and does so quite frequently. Adjust to where we are in any given moment. This moment says easy on the long-side and easy on the short-side, if that's what you're in to. Be appropriate and remain patient. We all want to be aggressive all the time, but this game isn't meant to be played that way. The whipsaw up here says take it easy. Use weakness to buy if you do insist on buying stocks. Let the market accomplish its goal of unwinding.

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.

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.