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Stock Market Gap and Stop....

Stock-Markets / Stock Markets 2014 Jul 17, 2014 - 01:19 PM GMT

By: Jack_Steiman


The market tried to get through that 4443 gap on the Nasdaq once again today. It failed. It had a good shot thanks to the earnings from Intel Corporation (INTC) last night. That stock exploded today. Normally when that happens to this degree, and it has been a long time since it has, the Nasdaq explodes up 40-50 points at the open and ends up with an up day of roughly 80-100 points. Not to be today. The market could never get through that nasty gap down at 4443 on the Nasdaq. It got through right after the open but never got going after that. It just died out. This is a change of trend from what we see when markets are ready to keep going higher. The problem, of course remains, sentiment but more on that later.

Full markets are tough because good news is now being held to just the stock that gets it but it's not spilling over to the averages. Gap ups just don't go anywhere, especially when they run into gap resistance which as you know is the very toughest of resistance to get through. So today we saw great stock news treat that stock well, but the market itself could never get rocking. A change of bullish trend that doesn't bode well for the market. That said, make no mistake about the fact that there's still nothing bearish, with regards to price and those key oscillators. Not until that occurs can the bears truly feel good about things. They're happy about today's failure at the gap once again but they shouldn't celebrate quite yet. Their work is still cut out for them.

Let's get back to sentiment. This is where things go bad for the bulls. Two full months now of readings over 40%, with the current number at 41.5% bulls to bears. One month of such a reading can send a market in to a tail spin. Eight weeks, and running, does not bode well for the bigger picture. When the market gives it up it will likely be very nasty. Again, as we have gone over a hundred times, you don't know when it'll kick in so front running makes zero sense. You only know that the market has a huge problem here. With the Fed keeping rates low, the bull is reluctant to allow a correction, but it will kick in at some point. You can stay with the long side of the trade for now, but be careful not to get too aggressive.

At some point in time the bull-bear spread will get back in the low 20's if not quite a bit lower. Just know it's out there, and think about the fear it'll take to get there, since the market is so unbelievably complacent right now. The longer a market stays complacent the higher the price that's paid down the road. One reading at 35% can send a market reeling. We have eight straight readings over 40%. Scary to think about the consequences down the road. We'll deal with it when it shows its hand, but, for now, it has yet to do so, and, obviously, great leaders having great earnings delays the process. Stay long, but be smart and respect the game.

So where are we technically on the froth leader, the Nasdaq? Let's go over things carefully. We've now made two tests with two failures, which is normal, at 4443. We need a strong push over 4443, which is the bottom of the gap. We then to take step two, which is to clear the top of that gap down, and that level is 4451. Only when we can close above 4451 are we ready to think more bullish. Anything below 4443 and finally 4451 is simply not bullish. However, it's not bearish until we lose the 20-day exponential moving average at 4397. 4397 on one side. 4443 and 4451 on the other side. A nice large area of noise, which can be extremely emotional. Understand them and you'll be less so. Only a close above 4451, or a close below 4397 is relevant. Just jeep that in mind in terms of getting a more directional move.

Keep it light. Keep it appropriate and watch those two levels for now.



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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