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Stock Market Bulls Roar Back...

Stock-Markets / Stock Markets 2014 Sep 27, 2014 - 12:35 PM GMT

By: Jack_Steiman


That's what a strong GDP can do for you if you're a bull. The market is ultimately always looking to go higher, so if you give it an excuse it usually doesn't have a problem doing so. The bears had their day yesterday with some strong down side action, which carried the Nasdaq 100 and S&P 500 below their 50-day exponential moving averages. You want to see, if you're a bear, a follow-through the very next day, but it didn't come. The futures were up last night immediately after the close. They built over night and exploded higher after the GDP report came out. After some decline ahead of the open, they ran higher as they day moved along.

The bears cannot be happy about today's action, especially since the move up was on a gap on the Nasdaq 100, the froth leader of the stock market. Always an excuse it seems for the market not correcting, but that's why you don't front run the market. Yes, we closed below the 50's yesterday, but you only short if you get a follow-through and then a weak back test, which clearly did not take place. So we're still nowhere. We have the very top at 2019. We have the recent low at 1966. Two days' worth of 1966. So the spread of whipsaw is now 53 points wide, or nearly three percent. Not going to be easy.

Understand that it's imperative for an index, or any stock, to follow through when it initially breaks down, because it shows that the big money that seemingly broke it down will continue to put pressure on it. If an index breaks down, and then shoots back up, it usually means only retail selling was taking it down and big money was then waiting to buy that weakness. This is what appears to have happened today and yesterday, although we're still in a trading range between 2019 and 1966 for now.

Break downs always need an immediate follow-through to confirm such an important event. This is why it's essential to get that confirmation first before acting upon it. No follow-through today means we have more discovery to do before entering any play, long or short, with confidence. I know that means more market whipsaw is likely, and it means a lot of cash, if you're so inclined. That means more boredom, but many will continue to trade somewhat aggressively no matter what the atmosphere of the market. Just realize how tough it's going to be for trading. There is still nothing easy, and there's still strong risk, to be sure no matter which side of the trade you take.

I, for one, have never liked it when markets get violent both up and down, but it usually means, if you go by historical means, that the market is trying to reverse the trend that has been in place for quite some time prior. Whether you're in a bull or bear market doesn't matter. The side in play won't give but thus very understandable. Many tests back up or down, usually occur such as it did with SPDR Gold Shares (GLD) when it topped out. It can take many months of struggling back and forth before a new trend takes over officially. That doesn't mean this is what it occurring now, but it does remind me of it, thus, we shall see. It doesn't have to mean a bear market, but it could mean a very nasty correction is trying to take hold. Only time will tell that tale.

For now, keep it light. If not, keep it in the range of 1966 S&P 500 up to 2019. Let that range be your guide, and see which one breaks first. Then when it does make sure, you get a follow-through confirmation. Nothing is easy in a froth driven environment.

Have a great weekend!



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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