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
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
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
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 Down But Not Out...

Stock-Markets / Stock Markets 2014 Jul 10, 2014 - 10:06 AM GMT

By: Jack_Steiman


That's the bulls for you. Just when it looked like it was all over, and it still may very well be, they stage a rally after two open gap downs that held. A rally up, sure, but a gap up made little sense. Now we do know that the gap up was filled back down with some indexes actually going red at one point today, so there's no technical damage to the good work done by the bears over the past two days. That said, it was strange to see such a decent rally today. The score is currently two to zero with the bears in front.

We have to be sure not to get too bearish until certain key levels are taken out big picture, and, of course, those would be the 20-, and especially 50-day exponential moving averages across all the key-index daily charts. That is a decent ways off, so we must not over react to what has taken place off the top before today's move back higher. The bulls did look to be in very bad shape, and now they're working on trying to take back one of those gap downs, but that won't be easy. So don't get too bullish too quickly either. Basically, we still have a very uncertain market with both sides fighting here. Neither one has taken full control, but with the two gaps downs before today that stayed open, the onus is now more on the bulls to take back what they've lost from the technical damage created. Lots of cash is still a very proper position.

Those poor bulls keep falling all over themselves. The bull-bear spread came out today, and the numbers were very bad, if you want things to go higher with regards to equities without much of a fight. With rates on the side of the bulls, it doesn't take much to get the market to move higher, but with froth so rampant, it's hard to get sustained, consistent large moves upward. A 45.5% spread is bad news, and was down to 41% heading in to last week. This is now nearly two months over 40%, and to be blunt, that's really bad news for the bulls. Froth just won't give it up. It'll be forced to at some point, but that moment is yet to get rocking, although the bears are now at least really giving it a go.

The spread will have to come down over 20% in all probability in the months ahead, and that means so nasty down side action. You prepare for the inevitability of that, but you don't front run it as we all know very well. That trade has been a disaster for the bears. Do not play with emotion. The bears have made a good first step with the two gap downs, but now we need to see some critical moving averages go away, and froth alone doesn't have to be what gets that to happen. It can be any type of rate news, or yes, it can be just those terrible numbers. When we lose moving averages that count, such as those 20's and 50's, then we know froth has finally kicked in its sell signal.

The Fed minutes came out this afternoon, and they showed Ms. Yellen is really working on ridding QE help. It'll all be done now by October, and that's good to see. She believes the economy will improve enough to do that dirty deed sooner than later, although I don't really believe she thinks things are all that good. She also knows you can only force so much inflationary pressures on a rather weak economy. She knows it's too much pressure on the average American, so she'll get it out of the way and let the rates world allow the market to hang, which, of course, supports Main Street. That is all she cares about. She'll keep those rates very low for a very long time to come as the economy still isn't showing the growth it needs in order to allow rates to rise.

So here we are with the bulls and bears fighting it out. The only smart way to play is lightly, whether a bull or a bear, and allow the market to tell us more over time. The two gap downs will likely cap the upside for some time to come, while the bulls can use the 20- and 50-day exponential moving averages as their land of key support to hold things up as the oscillators, hopefully, unwind without too much price erosion.

Be smart and play appropriately as we learn what the markets true intentions are in the weeks and months ahead.



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.

Sign up for a Free 15-Day Trial to!

© 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.

© 2005-2022 - 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