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Stock Market Strike Three-You're Out!......Well, Maybe......

Stock-Markets / Stock Markets 2014 Feb 27, 2014 - 12:08 PM GMT

By: Jack_Steiman


Three consecutive days have come and gone, with each day testing above 1850 on the S&P 500 intraday. Each day the S&P 500 failed to complete the breakout. Normally, when a key index fails for three straight days the bulls give up for a while, allowing the bears to do some damage for the very short-term. I said normally. And this should be one of those normal times, but this market has been stubborn to fall, even when it's obvious that it should. That said, I would expect some selling here, but how much is difficult to know. It could be all the way down to key support approximately at 1800, or it could stay above that. It's very unclear, and we all know by now that anything between 1800 and 1850 on the S&P 500 is nothing but emotional noise.

It's very easy to form an opinion about the market as it trades between, but really there's not much happening other than we're still in a bull that may need some time to fall and try again down the road. This failure for three straight days does not mean the bull is over, although you'll hear more of that if you surf around to different sites. Who knows, maybe I'm wrong, but I don't think the bull is over yet. A little pessimism wouldn't hurt, but we shall see. We should get some selling, but, in this market, I wouldn't bet on too much, and I certainly wouldn't short anything for now. We'd have to lose 1800 on the S&P 500, and then back test properly before even considering shorts of any kind. For now, the bears have won the short-term, but don't give too much energy over it even if we sell a few percent. The bigger picture is still solid.

A lot of really strong stocks lost their 50-day exponential moving averages today on big candle stocks. That's something that hasn't happened in a very long time. It is worth noting as it's a change of trend from what we've been seeing for quite some time now. Leaders, such as Celgene Corporation (CELG), in the bio-technology space, and IntercontinentalExchange Group, Inc. (ICE) lost their 50's with huge candle sticks down after looking bullish on their charts prior to today. There's a very fine line between success and failure in this business to be sure.

When more and more stocks are losing their 50's unexpectedly after flashing bullish patterns, it can mean the market is ready for something unpleasant for the bulls. Not every stock in every sector, but overall things may get quite a bit more complicated. Nothing lasts forever, and with three tries at 1850, it may be time for some prior leaders to give it up for a while, meaning you'd better be careful with those froth stocks as they can make you very unhappy in a very short period of time. Tomorrow will be very telling in terms of how much we can expect to see in terms of downside action in the days and possibly weeks ahead.

The S&P 500 has lots of support on the way down from here. 1811 is the 50-day exponential moving average. Always key to hold those 50's. Above that at 1823 we have the 20-day exponential moving average. Finally, we have support at 1800, thus, we have strong support for the bulls within a very small range making things tougher for the bears than they'd like it to be. Only if we lose 1800 with a bit of force can the bears start to flex their muscles with confidence. All noise in between.

Keep perspective. Don't get too bearish unless you see 1800 disappear.



Jack Steiman is author of ( ). Former columnist for, 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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© 2014

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.

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