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Trading Lessons

Stock Market Bears Taking Over....Deeply Oversold Short Term...

Stock-Markets / Stock Markets 2014 Apr 12, 2014 - 02:06 PM GMT

By: Jack_Steiman

Stock-Markets

It's the same old story folks. The bears bring the market indexes down to critical support zones. All they need is a gap down. Just one nasty gap down to put the final nail in the coffin. You can forget about that. Instead of gap downs we get gap ups. The bulls, where they have to, gap it up and send the bears back into hibernation. I know it makes absolutely no sense with how nasty those daily, weekly, and monthly charts look, but you can't fight the Fed, who, once again, reassured the market with the Fed minutes report that all is well. Ms. Yellen said she will be there to make sure the bull market continues with low rates. Once the Fed minutes came out, a good day for the bulls turned into a great day for them as the market doubled its gains into the close.


Froth is leading the way, which is healthy for the market. You want Disneyland stocks leading the parade higher as it shows those wild traders are back at it again, wanting only high flying non-reality stocks. With the close higher today, there is nothing for the bears to hold onto hope except for the possibility of some bad news coming in from overseas. The Fed has the markets back here at home, so while we may not blast right back up, it'll be very hard for the bears to do too much technical damage against the bulls. Again, only a massive gap down will get the job done on that front. Today was a perfect day for the bulls and not so perfect for the bears. The bears tried for six weeks, but when it came down to it, they failed right where they needed to succeed, at those 50 day exponential moving averages.

4208 is both the 20- and 50-day exponential moving averages on the Nasdaq daily chart. It's critically important for the bulls to be able to clear that double level of powerful resistance. You'd have to imagine that the bears will try very hard should we get up there to keep it from breaking above on a closing basis. If we clear that level with force it's going to be very bad news for anyone who's bearish as the bulls will get braver and braver. They'll have some fear as it gets closer that the bears will pound it. But if we get close and then just hang around for a day, or so, without too much price depreciation then the bulls will seize the moment.

This has been the trend with big resistance levels over the past year, or so. It can always be different this time, but that has been the way it has gone for quite some time now. So again, the onus is on the bears to change the trend in place. Above 4208 is 4286 horizontal resistance, thus, you can see why the bears need to hold the Nasdaq below 4208. While things aren't necessarily clear to me yet, the market did something for the bulls the bears could not do throughout the entire 7% correction. There were no open gap downs, but now, with today's move, the bulls have a gap up. Go figure. Now the bears have to remove the gap up. Good luck!

Yes, we still have nasty negative divergences across all the index charts on all the daily, weekly, and monthly charts. It would make sense for the market to collapse and you never disrespect those negative divergences. Just when you let your guard down you pay the price. We have to keep a higher market bias for now until the bears can cause carnage on a large gap down that runs lower all day. I'd still be very cautious with froth, but for sure keep a long bias until proven otherwise.

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.

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