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Elliott Wave Trading

Stock Market, BOJ Negative Rates...Poor GDP...Up We Go......

Stock-Markets / Stock Markets 2016 Jan 30, 2016 - 04:45 AM GMT

By: Jack_Steiman

Stock-Markets

Many bear markets in the past have gotten oversold, but one thing did not happen. The daily MACD's didn't cross back up from those oversold conditions. They met and kissed off back down, but today we saw crosses from those deeply compressed levels, which tells you we're likely to stay up for a while, although that level of up and how high is truly unpredictable. Will it only be a test of the 20-day exponential moving average, or will it get through the lost uptrend line, or beyond that, will it get back up to the 50-day exponential moving average? No way to know, but the uptrend line is at 1940. The 50's are all the way up at 1977. With the MACD crosses getting to the 50's is not out of the question.


If we do close decently above the uptrend line you have to question whether we've seen the worst of things and all we saw was a simple correction. You can get above only to be head faked, so watching those daily oscillators will be key if we do indeed blast above 1940. A big if. We have had many corrections in the bull market, and, although this one was more convincing based on technical's as well as economic evidence, you never know for sure. I would still say we're likely in a bear, but you can't be sure since we now have powerful MACD crosses from the bottom.

It definitely puts thing more in to question. Maybe the bull-bear spread getting down to minus 9% was enough for this market, and again, only a correction was able to occur. The number is unwinding, and now probably back to par or 0% on the spread, but seeing the minus 9% could have been enough capitulation. So much for us to learn as the market tries to get through so many different resistance levels mentioned above not to mention a plethora of gap downs on top of that. Many of those gaps also fall in to those areas of resistance. Seven gap downs off the top, so be careful getting happy too quickly. The journey, even if all this is was a simple correction, won't be easy. There's simply too much bad news around for all of these resistance levels to just give it up. Yes, markets mostly travel higher, but there are a lot of headaches above, so buyer beware. Today was a very important day when all was said and done. The MACD's crossed. Not to be taken lightly. The bears gave up when they needed to press down. Now, we see what the bulls have before the bears try once again and they will try for sure. Even if they ultimately fail, they will try and try hard at that.

If you study those monthly charts provided for you this weekend you will see really nasty numbers on the down side. Anything from 6% all the way up double digits. The selling earlier in the month was intense and quite merciless. Brokers and banks did the worst as the promise of more rate hikes went away. The earnings from the key banks also disappointed thus a strong one two punch to the gut. Anything related to the world of financial's disappointed for the most part. The higher P/E worlds took the hardest hits and that makes sense since when markets fall there is some attempt at a flight to safety. This is why the Dow and S&P 500 did better than the Nasdaq 100, small and mid-cap stocks. Now the question is Jack, where do we go from here. The monthly charts still look deathly, but they are unwinding finally. No one cares about what just took place. With many sectors lagging badly after poor earnings reports I would think that over time, at the very least we test back to or near the lows and then we'll learn more. Just too much resistance and bad news to just blast out. If and when we test back to the lows the oscillators will show the way. Positive divergences? No divergences? Impulsive or lack thereof? We learn more on the second move than on the first. That will be the big learning curve for all of us. The monthly charts just don't seem near ready in my eyes to give the all clear signal. Try not to get too emotional with this rally. As I mentioned frequently, we were very compressed, and, thus, some type of rally was imminent. It finally showed its hand today although again, the bears are not liking those MACD crosses.

What's always interesting about the stock market is it goes where it plans to go no matter what hits it unexpectedly. The BOJ, or the Bank of Japan, lowered interest rates to minus .1 last night. That type of action takes place only when a country is beyond desperate. It shows fear, weakness, and anything else tied to the call of HELP!!! In normal times I would have expected a market crash. Not a pullback. A crash. Add in a lower than expected GDP reading here at home and the market was set to completely fall apart. It blasted higher. The market will do what it wants with news if it has a plan to get somewhere. In this case, to retrace back up and test lost moving averages, and the uptrend line. The action taken in Japan is just so depressing if you're thinking global health. This is done when all else is lost and seems hopeless. A rising rate environment is what is the most healthy. It's bad enough at zero so when you create negative interest rates you are simply beyond desperate. Markets don't care. So now we learn, once the rally ends, what is truly in store for all of us. Sad it is to say that the bears have kind of done a no no here, so we watch the key levels and once again let me tell you the one I feel is most important, and by now you know it's the lost S&P 500 uptrend line at roughly 1940. It's the weekly one so we can breach above during next week but the bears will need a close by next Friday back below if we do indeed blast above intra week.

On the down side it's all about gap support at 1869 the bears tried hard to take away this week, but failed to do so. Longer-term it'll be about 1812, but that won't be tested, if at all, for quite some time to come. The markets had a lousy January, but we did not thanks to playing from a safety first perspective. Boring at times, but better than getting crushed. I'll see if there's anything on the long-side next week, but, for now, being a spectator is best.

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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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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