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Stock Market Unwinding...Market Environment...

Stock-Markets / Stock Markets 2016 Mar 24, 2016 - 12:30 PM GMT

By: Jack_Steiman


The market finally fell a little bit today. Are the bulls ok? I want to be sure you're handling it well. I wouldn't want any of you to feel someone is messing with you. I know it seems inappropriate for a down day, but it does happen every once in a while. Sometimes it's actually even a good thing. It helps to work off overbought conditions. I know it doesn't feel good, but that's the way it is. A day off from upside happens. Today was that minor down day and it did its job for the short term. A lot of solid unwinding for the short-term sixty-minute charts. The stochastic's, MACD, and RSI all having a nice move lower to allow the charts to reset themselves. The only problem the bulls will be facing will be yet another negative divergence will form on the next attempt higher since the MACD and other oscillators did impulse lower yet again on the selling.

Good to see unwinding without a lot of price erosion but the moves up have been on less and less impulsiveness, thus, the market will be dealing with another negative divergence for sure on the next rally attempt, which, of course, can't be too far off in the distance now can it. It will be a third, consecutive, negative divergence as well, which makes me think we could actually have two whole days down consecutively. I'm going out on a limb here, but it is actually a physical possibility. We'll see as I'm sure the bulls will say I'm hallucinating, but it really could occur. I say could, of course, because we all know that won't be an easy task. Bottom line Is today was a good day for the bulls and bears. The bulls because the short-term charts unwound, and the bears because they actually saw the market go down with a bit of force, especially on the Nasdaq and small caps. Both sides can feel good about seeing some red.

Let me take time now to discuss the stock market from, dare I say it, a real life perspective. Not Disneyland such as the market we're experiencing, but from a real world approach. I have to say that other than 2000 when the fed blew up the biggest bubble in history, this is the absolute worst environment for stocks I've experienced in my career. Again, I realize it's not acting poorly. I'm just discussing truth for the moment. So be patient, and then I'll get back to Disneyland, so don't worry bulls. We have massive, negative divergences on all the monthly index charts. Severe would be too little of a word to describe how bad they'll be when we break out on the S&P 500 down the road some day in the not too distant future. They don't get any bigger or nastier. They simply do not. No argument here folks. That's a reality. They couldn't be more against the bulls. Sorry bulls, it is what it is.

After divergences, we turn our attention to valuations. Completely off the charts wrong and inappropriate. The few stocks that have reported earnings the past week have not had a good time of doing so. Misses, misses, and more misses. No one cares as they go down and then blast up, but, again, in the real world they stink, to be kind. Valuations are so unrealistic it's hard for me to find the right word to describe it. Just off the charts insane. So bad divergences and totally unrealistic valuations, but we're not done. Not at all. Economies from all over the world are standing and barely surviving only due to the actions of the global central bankers. Low rates and sometimes negative rates along with endless inputs of free cash to the banks are the only things holding this together, but, in truth, they're not doing anything as these things have been in place globally for a long time and have nothing in the REAL world to help whatsoever.

Global economies are still weakening. Useless, but not for the perception it creates. So, now we have bad divergences, ridiculous valuations, and weakening economies globally. But wait, there's more. Most companies that are reporting their current earnings aren't saying anything positive about the future meaning, yes, things are bad now, but they'll be getting better. They're saying things don't look to be getting any better any time soon. Outlooks are weakening. It's bad enough to have a weak group of earnings reports, but it's far worse when they say the future isn't too bright. When you add all of these things up, it tells me the market should be dramatically lower than it is, but then we get back to Disneyland and the fed. How long can these folks hold the global markets up? I have no idea and neither does anyone else. It makes me very nervous, and anxious playing anything long, but, for now, I follow the bouncing oscillators. Be very careful out there. Can this keep going up? You bet. Could reality hit at any time. You bet.


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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