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Playing With A Breakdown... Stock Market At An Inflection Point...

Stock-Markets / Stock Markets 2016 May 14, 2016 - 08:26 AM GMT

By: Jack_Steiman


The market has been bifurcated for quite some time with froth leading lower while the S&P 500 and Dow try to hold up the market. Money has been rotating in to the S&P 500, because that's where lower froth, lower P/E and higher dividend stocks live. Big money hasn't made the big move, yet, of distributing out their plays. While they are acting more risk adverse, they still have been playing as if they want to spend more time with the world of the S&P 500 stocks. We know this, because, while the Nasdaq has long ago lost the 20-, 50-, and 200-day exponential moving averages, the S&P 500, before today, was above its 50-day exponential moving average. It had lost the 20's, but was still above the 50's, and well above the 200's, which lives at 2023. The 50's at 2048. So only if the S&P 500 were to lose 2048, and then 2023, would the market be in big trouble?

It's very close to forcefully losing 2048, which is interesting since losing the 50's would be a change of behavior. That would be a big red flag, even though it would still be above 2023. The 50's are more important technically than the 200's. So here we are. Finally, at a big inflection point in this market. The Nasdaq has already broken and is down 6% for the year, below all the key moving averages. If the S&P 500 joins the party, then the bears will be in control of this market, and we all know how long a time it has been since that was a reality. So we watch and see if the bears can do what they need to on Monday morning. They need a big gap down and run lower all day, and then they will have the game all to themselves.

I'm not sure the bears would know what to do with some good news. It has been so long, but the opportunity is there. They don't need a gap up on Monday. They need a huge gap down and go. No more excuses. Those days are over. The time is now. It's time to take advantage of their opportunity. It should be easier this time since they have the Nasdaq already broken. Again, their time is now. NO MORE EXCUSES. Get it done. Interesting times. We'll see if the fed here in the states, or the fed central bankers overseas, find a way to announce something over the weekend, since they all know the market is facing trouble here. Kuroda in Japan is the likely one to announce something. Keep an eye out for that.

Apple Inc. (AAPL) played with its breakdown level of 92.00 for several days. It would get down to 92.00, and then find a way to move back up. It breached that key level many times, but in the end it kept closing above. That was until yesterday when it snapped big time and hit the 89's before bouncing a bit. Today it did the classic back test only to fall back as the day moved on. For now, it is a severely broken stock. When AAPL is broken it's in trouble due to its intense weighting in the Nasdaq and Dow. If AAPL can't recover over 92.00 shortly, and that's always possible, then it can drop rapidly in to the upper 70's over a few weeks time. The Nasdaq would have more than a little trouble if AAPL keeps falling. A falling Nasdaq wouldn't be any help to the rest of the market, so keep all eyes on this key stock. The bulls are praying for an AAPL miracle. It doesn't look good, but you never say never. The big problem beyond AAPL is how many other stocks AAPL affects. So many providers to AAPL and their technology are breaking as AAPL falls apart. A domino effect. While all eyes will be on the S&P 500, and whether it can hold the 2048 level, many eyes will be watching AAPL to see if it totally falls apart. Above 92.00 or bust shortly.

Look folks, the market has held up for a very long time in to the teeth of bad news from just about everywhere. Some of it has been technical, such as those monthly negative divergences. Some of it has been fundamental such, as the ISM Manufacturing Report, GDP Report, and declining earnings. Let's see if the bears can finally take advantage of all of these problems facing the market. The fed has held it all up with endless low rates and QE programs. We even have Japan's Kuroda telling us more stimulus is coming. Quite possibly over the weekend. That said, you wonder when the market will simply trade off reality rather than all this nonsense from the central bankers, which in the end does nothing long-term anyway to help. The bears have it here.

They need a big gap down Monday morning to get this rolling their way. No excuses. We'll find out shortly if they have what it takes. 2023 is the final line in the sand if the bears can remove 2048 with force. Below 2023, and it could get very nasty for the bulls. A day at a time. You're up to bat bears. It's your time. We shall see if they can finally do something positive for themselves.



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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