Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Grinding

Stock-Markets / Stock Markets 2014 Jun 17, 2014 - 03:45 PM GMT

By: Jack_Steiman

Stock-Markets

The worst possible scenario is upon is for now. Grinding is not necessarily a precursor to a large move lower, which we know has to come to unwind froth. Grinding can last an incredibly long time and frustrate everyone. Markets are very good at that as we know all too well these past few months. We are grinding because we are full in terms of bulls, but we are seeing fear in the hearts of bears as shorting has not worked for them for quite some time. I guess you could say they're tired of being burned over and over again. Who can blame them. The bears need a bit of bravery to get the ball rolling down. Without any real bad news out there regarding our economy, and with the Fed Yellen reassuring everyone they're in control, thus, no worries needed, it's hard for the bears to find that bit of bravery they so sorely need.


Now, it is quite possible that the grinding is a precursor to the bigger selling to come, but as we all know by now, and yes it is boring, we need to see that large gap down that runs lower all day and closes at or near the lows. We then need a follow-through gap down within a few days to confirm the selling is here for a while to come. The news from Iraq couldn't get the ball rolling. That's not necessarily bullish. Grinding is waiting on a catalyst, but always keep in the back of your mind this one truth about severe froth. It does not need a catalyst. Under the pressure of a full market of bulls the market can collapse at any time. ANY TIME! There does not have to be a warning sign. So today was another day of grinding to frustration for the bears, while the bulls hold out hope we have another new high waiting out there. That could happen so don't front run as I always suggest. Do what feels right, but to be safest, you wait for the reversal candle, which is the large gap down that doesn't recover.

There are many different services out there and many large houses out there like Citigroup (C) that have ways of measuring the type of froth we're seeing. They all have one thing in common. They all confirm that the levels of greed and froth we're currently experiencing is not a common affair. It occurs once every 5-15 years, and when they have occurred at these levels in the past we've seen some amazing selling episodes kick in once things got rolling to the down side. None of the past experiences have been able to predict the moment the selling began, but these levels of froth and greed have never ended up positively for the bulls in time.

There was no choice but to unwind things over time and time is the key word. It's not over night. It's over a longer period of time. It takes quite some time just to get the bulls to turn agnostic, let alone bearish. It's usually at least a multi month process. So unless the way we have measured froth over time has changed out of the blue, most everyone agrees that, although you can't know when selling will kick in, the risk factor has jumped dramatically. That the odds are tremendously high that a very significant selling period will ensue shortly. That's all we can go by folks. Historical standards are all we have. There are simply too many reports out there that say by historical standards you need to be very careful about just how much long exposure you take on. Always do what feels right to you, of course, but please understand what you're up against.

No matter what price action takes place, there are only two levels that really matter for the bulls and bears alike. On the S&P 500 it's falling below 1897 with a bit of force on a closing basis. With regards to the Nasdaq, or the leading world of greed and froth, the level is 4204 or the top of the gap down to the bottom of the gap at 4186. So I'd say a close with a bit of force below 4186 sets the ball in motion for some deeper selling. If the S&P 500 is closing below 1897, at the same time the Nasdaq is closing below 4186, you need to be more than a little careful about how much long exposure you have.

Take it one day at a time and watch for that large gap down that runs lower all day. That'll be the first sign that things may be ready to change course. Day by day.

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.


© 2005-2022 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