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FANG Annihilated....Energy Leading....Changes Abound....Again!...

Stock-Markets / Stock Markets 2016 Mar 08, 2016 - 12:15 PM GMT

By: Jack_Steiman


We have had a bifurcated market for the entire year. The Nasdaq is now down nearly 7% for the year, with the S&P 500 down only a drop over 2%. Why is that you ask? Simple really. The bear market is froth, but still hasn't died as evidenced by the action in the world of the FANG!! Facebook, Inc. (FB), Inc. (AMZN), Google Inc. (GOOG), and Netflix, Inc. (NFLX), all slaughtered big time today, along with all of them losing key, exponential moving averages. Some lost all three in today's action alone. Merciless selling in leaders with high beta and higher P/E's.

The sign of a market is not ready to blast to all-time highs. Instead, what we're seeing is an agnostic market with no one fully in control as money rotates around. Now the money is running in to the world of the multi-year, slaughtered commodity stocks. Huge moves higher in to commodities and energy, and, yes, energy is the biggest weighting in the S&P 500, and, thus, why it's nowhere near as bad as the Nasdaq. No one wants high beta, high P/E stocks. They, for the most part, are RISK OFF. Lower P/E is risk on. The market doesn't want to just completely quit.

It wants to hang in, but the overall behavior in the old leaders tells me this year is going to be extremely difficult for everyone. You have to be very careful not to get emotional and fear missing out. Your money is not safe just anywhere, such as we saw for years in the bull. It's a different market now, and needs to be respected for what it is, not what it was. Hoping for things to be as they were in the land of froth probably isn't going to be very beneficial to your wallet. The market is making a very clear statement about how it feels about those old leaders. Never argue with the message of the market, nor play it with a wishful approach.

Things are what they are and if you take a long look at the action in the world of the Nasdaq you will see price doesn't lie. The old leaders are just that, old leaders. There is no sustained leadership anywhere in this market. Just because commodities are having a short-term happy time doesn't mean they're the leaders, nor the leaders you'd want anyway. In a real bull market, you see froth and beta leading with commodities struggling. The opposite is taking place, and that needs to be respected and understood in order for all of you to perform well with your trading. The old guard is out for now. Maybe it means we continue to just meander about overall. Bottom line is we're in a massive trading range for the moment. Be very careful where you place your hard earned dollars going forward.

The move off the bottom has been nice. We had readings on the sentiment front that were extreme, and the bears paid the price for that type of bearishness. Each and every day it becomes less of an issue as the bull/bear spread becomes more and more of a non-factor for the market. We should be decently above the zero line when we get the new numbers this Wednesday. While the number is still more favorable for the bulls, it is no longer relevant as an extreme for the bulls to hang their hats on. With that out of the way, the market will trade on overnight news out of the usual spots meaning Europe, China, and Japan.

We will also be paying close attention to the numbers that come out on our economic front. The key reports for March reporting are behind us. We saw those readings last week when we had the ISM Manufacturing Report and Services Reports along with the Jobs Report. There are smaller, but still important, reports popping up all the time that carry some weight, but the big reports are over for another three or four weeks. We will learn a lot about the market and what its intentions are as time moves along. Can the bears establish a down trend, yet again, or whether the bulls are strong enough to keep things mostly status-quo.

Back and forth swings to nowhere for the most part. We watch the usual oscillator price relationship on both the important sixty-minute and daily-index charts. I get the feeling both sides are going to continue to have their moments in the sun, probably no clear cut winner either. The bears need to get busy soon for they've lost their momentum. They've allowed the retail buyer to take control again as they gobble up all pullbacks. It's not a lost cause for them, but the longer the market hangs tough the more you'll see the bears give it up. They're very used to, and, I'm sure, tired of being on the wrong side of the trade. They need to get busy sooner than later.

The S&P 500 has an easy chart to read. We have a double top at 2009 and 2006 from Friday and today. If the S&P 500 can close above 2009, I'd say look out above. Should be difficult to do in the short-term. On the down side we look at key support levels on the daily chart. 1948, 1946 and 1937 are a cluster of support numbers close together. They are the 50-day, 20-day, and gap numbers, respectively. If the bears can close this below 1937 they're in business, but that won't come easily at all. Bottom line is the tough environment continues on for 2016. Day to day with no stress is best. Keep it light, and, for now, be careful with high bets froth stocks.


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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© 2016

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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