Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

Economic News Gets Worse... Stock Market Sentiment Unwinding....

Stock-Markets / Stock Markets 2016 Feb 25, 2016 - 05:24 AM GMT

By: Jack_Steiman

Stock-Markets

Lots of bad news for the bulls today as the bull-bear spread blasted up from -13.5% to just -1.0%. A 12.5 move of bullish behavior and thinking. Then to add to the bad news we saw the flash ISM Services Report, or the preliminary report, come in below 50.0 for the first time in three years. Down nearly 4% month over month, which shows a very strong decline in the overall economic activity for our country. The services sector had been holding up better than the manufacturing sector, but it is clearly playing catch up. This is the worst possible news for our economy, to be losing the last piece of hope for an economic recovery. Bad news on sentiment. Bad news on our economy in a very big way, and the result is a nice blast higher in our markets after gapping down nicely and running lower after we opened up for trading. Would you expect anything else?


As I always tell you, it's never about the truth, but about what the market wants. That's the tricky part of all of this. You have to turn off reality when you're playing this game. So today we saw an amazing reversal off the lows, which has set the market up for what should be somewhat higher prices. How high, I don't know for sure, but I could see 1970-2000 on the S&P 500. No guarantee whatsoever, but things are set up for higher prices short-term. Long term, the game is going to be far more difficult and frustrating, but for now today's action makes the short-term seem and feel more favorable. Oscillators confirmed things. The move down didn't push the MACD, down and that's what I hoped to see.

All we can do is play what we see and not what we know to be true. Even then there are no guarantee's but the set ups are there. Let's hope they play out appropriately. Sentiment really unwound this past week. Complacency already starting to show up across the board. A 12.5% push up in one week is amazing. That said, we're still below zero on the number, and that type of number is still favorable for a while longer for the bulls. If it should get towards 10-15% then things become a bit more agnostic short-term, but right now we don't have to worry about the reading, even though it's already starting to show how fast folks want to get back involved. The market over time should be studied hard with regards to sentiment extremes.

Most of the time it's a waste of time to include sentiment in to your thinking process, but when you get to below -10% on the reading for two consecutive weeks, you begin to realize just how many shorts had blasted in to the market. When there's too many shorts, the game of reality moves further and further away, since the market will now respond to short covering over true economic news. Shorts don't hold their positions very long, since they know markets go higher most of the time. The average short hold, I believe, is under two trading sessions. I think longs hold twice as long, thus, the game is always against the bears. Since they were loaded up as high extremes, it shouldn't be a shock that we are moving higher short-term. Sentiment is now the friend of the bulls very short-term. That will go away in time as always.

Here's the key for the short for the bulls and the bears. The S&P 500 has made a double top at 1947 from February 1 and February 22. The bears don't want this level to get taken out. If it does, they will be forced to, once again, cover additional short plays. That would be the fuel for further upside for the bulls. 1891 is now key support on any selling to come. If we do clear 1947 with a bit of force, like I said earlier, I could see us challenging close to S&P 500 2000, before things get very tough for the bulls again. We take this one day at a time and we make sure we, ourselves, do not get complacent. Let's hope for a gap up in the morning.

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.

Sign up for a Free 15-Day Trial to SwingTradeOnline.com!

© 2016 SwingTradeOnline.com

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.


© 2005-2016 http://www.MarketOracle.co.uk - 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

Catching a Falling Financial Knife