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Poor Jobs....Daily Stochastic's Oversold......2043 Breaches But Holds.....Shocker!

Stock-Markets / Stock Markets 2016 May 07, 2016 - 06:33 PM GMT

By: Jack_Steiman

Stock-Markets

Another interesting bull-market day as there still seems to be nothing that can take this market down with any force. As a reminder, I have spoken about how we still haven't seen any major distribution off tops on any of the key, daily index charts. That's the first big hint that something bad is beginning to take place.


Without heavy volume selling off tops it tells us that the move lower will likely only be temporary. The long-awaited Jobs Report came in far worse than expectations. Forty thousand lower than expectations, which means the economy isn't moving along as hoped, but also tells us that since there was job creation it's not falling off a cliff either. Just simply meandering a little weaker step by step. Slowly but surely our economy is in decline, but not the type of decline that would force big money to give it up apparently. Again, the no-alternative theory. So the economy is weak, but since it's not totally dead, and rates are so low, let's just hang in there and buy up lower beta, lower P/E, higher dividend stocks.

The S&P 500 is leading for these very reasons. The Nasdaq is lagging by quite a large margin. 6% worth, which is a huge separation. We breached 2043 on the S&P 500 today. We saw 2039, and it seemed the selling was about to happen. Apple Inc. (AAPL) testing massive long-term 92.00 level support as well. It was time. The bears were ready to have a dance of delight. Or something like that. A dance they haven't been able to dance since January first. But wait. Out of the blue, when all seemed lost, came the magic bids that kept the S&P 500 above the key 2043 level or the 50-day exponential moving average. With the Nasdaq already below all key exponential moving averages the bulls were counting on the S&P 500 to save the day, and for now it did just that. In the end the bears came very close to a celebration, but that celebration will have to take a back seat to more disappointment for at least another day. The bears are used to it by now. The market to nowhere is still upon us. Boring and dangerous.

One aspect of this bull market that has been incredibly consistent is daily stochastic's on the index charts. When that oscillators gets oversold, anywhere around 15, or lower, the market seems to put in a meaningful bottom. We hit 2 on the Nasdaq and 7 on the S&P 500, and Dow at today's lows. Again, these are on the daily charts. In the past, when markets collapse for a month, or so, stochastic's will find a way to stay oversold. It does happen. Most of the time it does not. Is this the exception time? It can be, but, for now, we'll need more evidence. Since it usually isn't the onus, as always in a bull market, is on the bears to change what's already in place technically and on price. Stochastic's are suggesting a bottom has been put in, but we won't know for sure, and this can be said with certainty. We tested the 50-day exponential moving average on the S&P 500 today with the usual slight breach, but it held perfectly, and, thus, it should equate to higher prices in the short-term. I say should, because with longer-term negative divergences in place there are no guarantees at all. Just hope, for now, since the bulls did what they needed to yet again. And again in to the teeth of the worst possible economic news for the day.

The market has fallen quite a bit, especially on the Nasdaq heading in to today's action. The market is clearly bifurcated, and in most cases that's a bearish longer-term signal, especially when the Nasdaq is trailing behind so severely. It looks like the market is weakening internally, but you have to respect price first and foremost. Price is still hanging on by a thread, but it's not out of the woods. Even though today worked out in a bullish way for the market, there is still plenty to be concerned about in terms of fundamentals, negative divergences and froth. Those monthly charts are still in a terrible way. Economic fundamentals are eroding and the S&P 500 is up to an extremely-lofty, 24 P/E in a declining earnings environment. All those factors should be respected. Never ignore the truth even if truth isn't playing at the moment, because you never know when it'll decide to join the game. The negatives mentioned above aren't a joke, or to be totally ignored. Becoming too complacent can be very hazardous to your wallet.

Respect, respect and more respect. When you lose respect you lose your shirt.

Peace,

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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