Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Hard Gap Down And Run.... Fed Governor's Talking Rate Hike...

Stock-Markets / Stock Markets 2016 Sep 10, 2016 - 06:01 AM GMT

By: Jack_Steiman

Stock-Markets

When you have negative divergences on an index chart, or any chart for that matter, you're waiting for a gap down to occur in order to get that negative divergence to kick in and create real down side action. The gap down we saw today was quite powerful, but what was even more impressive was the gap and run lower. Many times we get a gap down, but most of the damage is done in the first few minutes. After that the market starts to recover and all is forgiven. This gap down didn't have those characteristics. Quite the opposite. It gapped down quite nicely and kept running lower. A sign of real selling from the big boys and girls who rule price. A negative divergence can be in place for weeks or months before the right candle stick hits and carries it appreciably lower.


The gap down is always the best news for the bears when this situation exists. Today's action with the gap and run is truly important, because it's a change of character. It's essential to focus in and recognize a change in market character as it can tell us what to expect for the short-term at the very least. A gap and run with force hasn't taken place in a very long time, and since it came from near an all-time high, you have to take notice. It's telling us that the negative's out there are for real, and that the market is respecting them. For a long time, the market hasn't respected the real world, but the culmination of bad news recently on the economies globally are starting to take hold. The red flag is up with today's technical action. We're still above 2134, but we're now nowhere near 2194. Oh so close, but no cigar.

Germany had a report last night that said their imports and exports were going in the wrong direction. Increases of 0.8 and 0.3 respectively were met with readings of MINUS -0.7 and -2.6 respectively. Huge misses, and yet another sign of how bad things are not just here at home, but all over the world, especially in key hot spots of supposed growth. Areas of the world that contribute mightily to the well being of the global economies. The Euro zone, especially Germany, are looked upon to help carry the burden of growth, but the numbers that are coming in are painting a very different picture.

We have had huge problems here at home just recently with our ISM Manufacturing Report and services numbers. Jobs also pulled back. The real problems were those two ISM readings. Services, which are now nearly 80% of our economy fell from near 58% to just above 51%. A gigantic fall. There doesn't seem to be any areas of growth. In fact, Japan announced just two days ago that they are seriously considering lowering already negative rates. Are you kidding? The reality of where the global economy is heading is not a pretty picture. The trend is south and doing so quite rapidly. Something that needs to reverse soon or a recession isn't too far behind.

The most interesting thing out there is how many fed Governor's are coming out and saying it's time for a rate hike. You have fed Governor's coming out it seems almost every day trying to prepare the markets for a rate hike even though the economic reports aren't any good. I think they're starting to understand the bubble they've created. I think they understand that the nonsense has to stop somewhere and maybe, just maybe, that time is finally upon us as housing prices soar for no good reason while the economy is weakening.

The bubble created is an all timer as earnings are on a massive decline while P/E's are soaring. The disconnect just about as bad as I've ever seen it. The madness has to stop somewhere but knowing the fed it may not have stopped. Who knows what else they'll do. That said, Ms Yellen does seem to be thinking harder about actually raising rates. The market will now focus endlessly on September 21 when she announces whether she's raising or not. The way she's sending out so many of her crew to talk up rate hikes, she may actually just do it. Interesting times as maybe we're about to finally see rate hikes in our future. The real world needs it. The bubble will burst someday.

Finally, let's focus on the monthly S&P 500 chart, which recently hit its trend line top. The question was whether it would break out above the trend line or reverse lower. With oscillators at very high levels, and with negative divergences in place, it seemed most logical for failure to ensue. The market has ignored all negatives, so there was no guarantee, but it seems as if the reversal has taken place and now we have plenty of room to fall if the market wants to do it. Of course, we'll see if 2134 holds or not and over time whether 2100 holds, but, for now, all we know is that the trend line top has caused the reversal. The catalyst being the rate hike talks. It takes only one piece of news to reverse things when you're in a bubble.

We watch and learn over the days and weeks to come.

Have a great weekend.

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.

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.


© 2005-2022 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