Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Severely Oversold Stock Market Offers Up A Rally...

Stock-Markets / Stock Markets 2010 May 22, 2010 - 06:02 AM GMT

By: Jack_Steiman


The market gapped down big again this morning and the bears tried to follow through on the break below the 200-day exponential moving averages that went away at the close yesterday. They felt sure they had the bulls buried and who could blame them for feeling good about things. However, I sent out an early note telling everyone not to short the move lower as the market was extremely oversold and that shorting wouldn't bring about much satisfaction.

The market blasted higher off the lows with the Dow going green by about 130 points only to see the entire gains wiped out with thirty minutes left in the trading day. It seemed hopeless but, out of nowhere, the bulls took the market up furiously in the last fifteen minutes allowing the market to close near the highs for the day. The bounce we thought would take place did and it should not be over yet.

There should be room back to at least the 200-day exponential moving average on the S&P 500 at 1102 and then after a pause there it should try to move up to its 20 day falling exponential moving average where it should top on this bounce. That would form a right shoulder in a head-and-shoulders pattern but more on that later. Bottom line is, the extreme levels of oversold kicked in today allowing for the start of what should be a decent rally before it ends.

A chart was sent out today showing the potential for a big picture head-and-shoulders pattern that still needs a right shoulder to form, which would also allow for oversold oscillators to unwind back up. The daily charts have MACD's that are simply too compressed down with RSI's near 30. Not the formula for additional downside action. A relief rally should take place that sets the right shoulder, and right shoulders should always have lower right sides than the left.

The 20-day exponential moving average is racing down and should be near 1130 some time later next week. I would think the S&P 500 has a shot at that level although getting through those 200's won't be easy since the SPDR S&P 500 (SPY) also has a gap at 1100 which will make for a strong resistance zone. I think the bulls can ultimately get through this level and get to the 20's I just spoke of and that would set the pattern for a move back lower. There is a shot that the 1100 level will be too tough for the bulls in the end but my gut tells me rally up to the 20-day exponential moving average is in store for this market.

If you're a bull, here's the scenario you're hoping for medium-term. We get the rally and stall at the 200's or the 20's and turn back down. As we go down in price the MACD's hold up extremely well and put in strong positive divergences at the bottom of its cycle range, and thus the market finds a way to bottom without getting in to a deep bear market. Lower price and a higher MACD near the bottom would be great news for the bulls.

Conversely, if you're a bear, you want to see the MACD do next to nothing on this move up and thus make a new low as the market heads back down after this rally concludes. There is no humanly possible way to know how well the MACD will impulse or not on this move so we will have to be spectators to it all. The market will tell us when the time comes.

Today was nice but not unexpected at all. This is still a broken market so don't get excited about anything that took place with today's action. Many leading stocks are in deep bear markets but extremely oversold so you have to expect a rally. Even with today's rally and with higher prices still to come short-term, they will still be in their own bear markets as they trade below their 200-day exponential moving averages. Hopefully they can repair themselves over time but for now and on any rally short-term, that won't help them get out of the poor patterns they are in currently.

Emotions are running high now as bad news continues to come out of Europe and out of our own country. Bail outs, higher taxes, etc, are on everyone's mind. Can you imagine what that does for the sentiment of a market place. It ratchets down the optimism and creates fear and that's exactly what this market needs if it's to have any chance of recovering from the pattern that's currently setting up on the S&P500. With the Volatility S&P 500 Index (^VIX) being so high we are seeing tremendous whipsaw. This is what creates intense emotional reactions from traders.

Breathe and recognize what's taking place day to day. The market is hanging by a thread and should try for higher short-term before rolling over again. It's really what happens on the next down swoosh that'll tell us more about whether this is the start of a bear or if it was just a correction within an ongoing cyclical bull market.



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.

Sign up for a Free 21-Day Trial to!

© 2010

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.

© 2005-2019 - 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

6 Critical Money Making Rules