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Stock Market Rally Refuses to Die

Stock-Markets / Stock Markets 2014 Jun 21, 2014 - 07:39 AM GMT

By: Jack_Steiman

Stock-Markets

I'll keep this brief this weekend as there really is very little, if anything, to add to what I have been talking about for weeks, if not months. The market is somehow finding a way to hang in there against all the odds. The froth and greed are ramping higher by the day as the market hangs tough. Yet, through all this greed and froth the market doesn't fall. It should get crushed, yet it doesn't. We have had exceptions to the rule historically. In the bear market of 2007 we had a bull-bear spread of -22%. Maybe we need +50 this time to get a top in. No one knows, but in the end, it's always about one thing in the short-term and that one thing, of course, is price. Nothing else. PRICE! What is price doing and how are those oscillators responding is all we care about. Nothing else.


Sure, we're on guard for all other possibilities. We watch for that big gap down. We watch for the gap and, run lower all day, but until we see it on higher volume, and until we get the follow through gap down over time, we can't get bearish. Getting bearish ahead of the move has caused nothing but massive pain to the folks, and there's lots of them, for a long time now. Front running rarely works because trends are hard to break. Being the one to call the trend change ahead of time is a fun thought, but it doesn't usually work out very well. I can tell you there are lots of people who wish they didn't play with reality as part of their mantra. Reality is only what takes place. Since the market is mostly a big lie in terms of truth, why bother playing it any other way. In the end, the market is hanging tougher than it probably should, but there's still no reversal stick to tell us to move away from what we've been doing for a many months now.

Just a quick over view of key support in both the S&P 500 and Nasdaq 100. The index of reality and the index of froth. Froth leads bull markets. Reality leads bears. Let's focus on the bull. The Nasdaq 100 has a strong gap between 4186 (bottom) and 4204 (top). Only when 4186 goes on a closing basis do we need to pay special attention to a realistic trend change. And only when the S&P 500 loses the key level of 1897 do we have trouble there. Anything above 1897 and 4186 is useless in terms of understanding whether we're about to break down or not. We can sell decently, and it can feel like a trend change ahead of those levels, so be careful not to judge what's happening until those levels are gone for good. A strong close below 4186 and 1897 on high volume will do the trick.

With all the warnings out there just be smart and keep things appropriate. Don't get overly involved with froth or high P/E situations. Keep stops very tight so as to not let things get out of hand. Take gains quicker than normal. Day by day until the market shows its hand that things are now reversing.

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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