And this is no joke. Snap go the 50-day exponential moving averages on the Dow and S&P 500. It took only two-long sticks on consecutive-down days to take out 21, overall, up days on the indexes. That's how things work when they snap on the indexes. Lots of grinding up in to massive complacency, and then snap, down she goes, taking a month's worth of upside out in two simple days of nastiness.

For four-plus weeks the market ground without any appreciable-upside action, but it refused to cave in. Stocks were in patterns that suggested more upside could, if not should, take place. Of course, at some point in time, the good set-ups have to stop working. They have now officially stopped working. There's an amazing amount of carnage just about everywhere you turn.

Nowhere to run, nowhere to hide. Nowhere to put your money in terms of safety. When markets finally give it up, this is how it works. Consecutive, large opening-gap downs that run lower all day, which ultimately creates massive-technical damage. One-large gap is bad enough. Two is really bad news for the bulls. So we have now snapped lower. The tide has turned. The bears are more in control now with upside tougher and tougher to get from a sustainable perspective. Lots of up days, but the road is tougher now for the bulls, and clearly, a bit easier for the bears.

So why is this happening is the question you're hearing on the business-news channels. It's amazing that basically no one talks about the real reason. They are talking only about the catalyst, China. They are not talking about Sentiment. They are not talking about all-time record margin or bullishness. Excuses are coming out from everywhere. The market hasn't had a correction, etc.

The market corrects when extremes find a real catalyst. Simple as that. China the excuse. Even poor earnings weren't enough for the short -term to get the market to fall. It stopped going up, but it refused to fall. It took China, a global giant, to have a purchasing-manager's report that suggested recession for the market to finally fall with force. In the end, folks, it's all about ridiculous Complacency, and the market ultimately always teaches hard lessons when that takes place. Froth stocks just crushed today.

Some incredible moves lower across the board. Again, nowhere to run, nowhere to hide. Those froth stocks will be fun to own again in time, and, of course, they'll bounce here as well from time to time, but the good times of sustainability are over for a while. The market will now need to unwind things a bit longer, but at least the process has begun. We finished last week at 42.5% on the bull-bear spread. This week coming, when we get the numbers, I am positive it'll be decently below 40% now. In time it should get well below 30%.

The Dow is well below the 50-day exponential moving average. The S&P 500 lost it at 1809. The Nasdaq is closing in at that level at 4084. If, and when, all three are below the 50's, the selling should accelerate. The 1775 down to 1750 area are support levels on the S&P 500. 1809 is now resistance. The market sent a message today. It's telling us to play carefully. To not get involved with froth stocks, which taught some sad lessons today.

If you play go very slowly. Very little exposure at any given time. This process may take quite some time so buckle up and be prepared. One day at a time as we learn on the fly.

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.