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Finally Some Stock Market Selling...Nothing Bearish Yet....

Stock-Markets / Stock Markets 2014 Dec 09, 2014 - 11:40 AM GMT

By: Jack_Steiman


And that's the key to the whole thing. Ask yourself, is the selling that took place today bearish? Answer is that for now, not at all. No heavy push negative on the daily oscillators. No big gap down that closed at or near the lows. Just overbought conditions getting unwound as they need to be. I get tired of staring at 70 RSI's, or higher, on the daily-index charts. Thankfully, they are now all below. Many in the 50's, except the Dow. Safest dividend stocks getting the action, thus, the Dow is still in the mid-to-upper 60's. At least it's an index of only 30 stocks. So yes, solid unwinding on the index sixty-minute charts and some decent unwinding on those key-index-daily charts.

A relief from the high readings for a day anyway. A few weeks would be better, but we'll take a day's worth. The market is selling some on the excuse of the horrible number on the Japan's GDP report this morning, which was expected to show recession, but was even worse than expected. They are in some real trouble. Their market actually recovered on the belief, yes folks, you got it, that QE is coming their way. The Fed Governors everywhere is expected to appease horrid conditions by simply printing dollars. It has become the normal way to respond to all problems. Print those dollars anywhere and everywhere. No worries about future consequences. Just print dollars. So, today we sold and it wasn't bad. It was needed and only helps. Nothing bearish yet. A little more selling would be nice.

When studying a market you can get very emotional from this perspective. We all know that the oscillators talk. They can tell you when price on a given stock or an entire sector is in bull mode or bear mode. Sometimes, in the very best of circumstances those oscillators can stay overbought. It can make you stay away, however, since you feel you shouldn't be involved with overbought stocks. However, if the situation is special meaning a long-term base breakout, such as we've seen in the financials, or we have stocks that benefit from low oil, they can stay overbought for a long time. But, again, the overbought scares you away. In this case they'll stay most overbought because of those special situations.

On the other hand, we see commodities doing terribly, yet they are staying oversold. You get tempted to buy oversold and are getting burned. 22 RSI on oil. It's been below 30 RSI for a long time, which drew in longs, and they are hurting. The lesson in all of this is stick, with the strong, and use any weakness to buy those areas, while avoiding the weak. Don't play hero and try to catch some type of bounce. Not worth the risk. Bear stocks can stay bearish for a very long time, even in an overall bull market. The rails crushed due to their exposure to commodities. Airlines doing well due to the plummeting price of oil, etc. Always pullbacks in the strong and rallies in the weak, but try your best to remain with the trend in what's working big picture.

2051 is the 20-day exponential moving average. There is also gap right there or 205.58 on the SPY. That area is the focus short term for the bulls and the bears to fight over for now. We came within a hair of testing those levels today, and may, yet, still test them, but the bears need a strong close below and preferable starting with a big gap down before they can feel better about things. Until that occurs the longs have the game in their hands. Below that the bears and bulls will fight over the 50-day exponential moving average, but why talk about that now since that's not what we're dealing with yet.

A day at a time. Stick with the best areas and keep it light 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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