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S&P 500 New High....Then Bye Bye.....Froth Absolutely Annihilated....

Stock-Markets / Stock Markets 2014 Mar 22, 2014 - 02:54 PM GMT

By: Jack_Steiman


This was a day to remember for many. So many will never play the game again after today as those who lived by the sword clearly died by it today. There were losses that most won't be able to overcome from a mental perspective alone. The moves from the highs to the lows on many stocks are just beyond stunning. Biogen Idec Inc. (BIIB) and Incorporated (PCLN), just to name two out of more than one could count. The losses are not just from today, because these froth stocks have been in their own little bear market of late.

Today the cap on many of them as the final lesson of knowing when to stay away was taught to far too many. This is the normal progression of a bull market. Froth runs and runs, and after a while many can't take it any longer. They just have to get in, and that's when volume spikes up only to be the highs. The free fall that occurs is scary, and many won't survive it emotionally. Wash, rinse, and repeat, sadly. Hopefully, for all of you, the lesson is now clearer without any of you taking any unnecessary pain.

The market started out with lots of hope as it gapped up yet again. Did it make sense? Not technically it didn't, but you never fight the markets message. That said, it didn't feel right to chase the move, simply because the market was up against it on so many levels. From too many bulls to too many nasty negative divergences on both the daily and weekly charts. Throw in grossly-overbought monthly charts and you really wouldn't expect the market to rock higher to new, sustainable highs.

The gap up ran, but the Nasdaq suddenly began to way underperform. Stocks were reversing very hard off their highs early on. The S&P 500 made a new high by a few pennies when the reversals began. Nasdaq crushed off the highs with froth destroyed. However, safer, lower P/E. Lower beta stocks held up extremely well as seen by the advance-decline line on the New York. This makes things more complicated, but I'll get to that shortly. In the end, the markets took losses. The S&P 500 and Dow barely down with the Nasdaq down 1%. A weak day for the bulls, but let's see the bears seize the moment they've been unable to thus far.

The complicated thing to try and understand is how this market is going to correct too much bullishness and those nasty MACD's. Will it be an overall, everyone in crater lower or will it continue to be those froth stocks alone? The froth world is in a nasty mini-bear market right here. Some incredible short-term moves off their highs. Of course, it would be best if the entire stock market joined in to the down side. If the whole market took a nasty hit it would allow that bull-bear spread now at 34% to move down into the teens, which would be really bullish for equities. If only froth moves lower for now meaning rotation continues overall, then unwinding will be far more difficult and less healthy for the bigger picture. 

I have no way at this time to understand which way this will go. It's too soon to grasp, but I am rooting for an all-in down-side move. My hopes mean nothing to the market, thus, until the S&P 500 loses that key 50-day exponential moving average along with the Nasdaq and Dow, the bears have nothing, and I mean nothing to feel good about. The financial stocks had a massive reversal lower today, and maybe that sector will help to bring the market lower. But for now, the bears have all the proving to do. My best advice remains what it has been for weeks. A little scratch in the game is fine, although lots of cash is best, and keep away from froth at all costs.

Let's see how the market handles things next week.



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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