Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Daily Charts Are Fine...Weekly Charts Are Not.....Implications?

Stock-Markets / Stock Markets 2014 Feb 22, 2014 - 03:32 PM GMT

By: Jack_Steiman

Stock-Markets

The weekly charts are all wrong. The MACD negative divergences, along with negative divergences on the stochastic's, RSI's and histograms make for a very ugly picture. Then there's the daily charts. Nothing really bad there. Nice looking MACD's. Strong RSI's and stochastic's. So what is the message? It's really hard to know, but if we go back in time, the last time the Nasdaq had this type of negative divergence, when it finally kicked in, it was a 13% drop. You never know when it'll kick in, but that was the situation. It doesn't have to be so bad this time, or it could be worse, or obviously somewhere in between. Add in grossly overbought monthly charts and you get the idea things could get ugly soon.


However, and this is a huge however, you never know when it will kick in. We may break out above 1850 first, only to see that become a head fake. There's always the possibility that the negative divergence will be ignored until we get to 1900. The point is you recognize the risk and adjust accordingly. It means, due to the fact that the daily charts are fine, you can have some exposure, but not too much, and probably it would be best to avoid the froth world for now. The message is very mixed, and because it is, you need caution. It would also be best if we just fell very hard for a while to allow those nasty divergences to work themselves off. If that occurred, the road would be clear for more aggressive playing on the long side of this still ongoing bull market. For now, we proceed with caution. Another test of 1850 was rejected today, so, for now, we're still in a range. Play, but play appropriately.

Just because we failed today doesn't mean that we're about to fall hard. We have tried a few times, and each failure bought about a small pullback that was eventually bought back up. That process could repeat until we get through. However, at some juncture enough failures usually equates to a stronger move lower, thus you have to be prepared. We all know by now there's a cluster of support zones from about 1815 to 1800. Anything above 1800 is merely noise with regards to selling. A strong close below gets my attention on the bearish side for a run potentially much lower.

This range is rather large for the S&P 500. Roughly 50 points or nearly 3%. It's much easier to trade a range defined by under 2%, but we play the cards the market has dealt. It would make sense to try lower from here, but this latest time period, when opportunities have arisen, have shown the bears to be very timid. That doesn't mean it'll remain that way. Not by a long shot, but the onus is on them to prove they can do something to make the technical picture turn more bearish. This is a very important time here for both sides. That said, some selling above 1800 doesn't mean we're about to crash out as many will claim. Once we sell you'll hear the bears chatter quite a bit. See it before reacting to it.

The bulls are getting more active in terms of complacency again. The bull-bear spread nearing 30% to start the week with a strong ramp in the number of bulls last week. With this week's mostly-positive action we may be over 30% on the spread once again unfortunately. Another possible reason for some selling back down towards 1800?

Perhaps, but again, you can't be sure and you shouldn't front run it. These are very interesting times, but we have this huge 50-point monster to deal with in terms of important support and resistance, so it's become more difficult to play. I would prefer to see the spread down to 20%, or lower, over time, but that would require a break below 1800. If that does happen, the numbers will come flying down very rapidly. It would be good news for the bulls, even though it won't feel that way.

Again, for now, some exposure is fine. Too much is not. It would probably be best if you don't chase around too many of those classic froth stocks for a while longer.

Have a nice 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.

Sign up for a Free 15-Day Trial to SwingTradeOnline.com!

© 2014 SwingTradeOnline.com

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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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