Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Rally Time Off Retest?.......Still Some Positive Divergences...

Stock-Markets / Stock Markets 2016 Feb 13, 2016 - 06:20 PM GMT

By: Jack_Steiman

Stock-Markets

If we study the market charts we can see quite clearly that we're seeing bear-market action. That said, you can't go straight down forever. The Nasdaq fell 18% in just six weeks. By any bear-market measurement this is too much too fast. Price isn't the problem. It's the speed of the move along with price. Such a short time frame to have that size of a loss without some type of exhaustion. One would think anyway. There are missing ingredients to a short-term bottom, such I have recently discussed. Nothing with regards to a high put-call ratio for several hours over 1.5. No trin at 3.0 or higher, and clearly no dramatic VIX spike.


All of these ingredients are usually present when a market is about to bottom. Not one of them occurred. Makes things a little less certain on the we have to rally front, but all of that said, the fall has been intense over a very short period of time, so the thinking is that we should rally a bit. Not the rally of a life time, but a rally, nonetheless, that should retrace some of the recent losses before we head lower once again. It can last for weeks overall, but not up every day. A trend higher over a few weeks that one would think should at least back test all of the lost 20-day exponential moving averages currently at 4479 on the Nasdaq, 1895 on the S&P 500, and 16,201 on the Dow.

We have a ways to go to get there, thus, it's still possible we'll see those levels before the overall rally ends. No promise, and surely no guarantee, but these levels make sense. Maybe we fall a bit shy, or maybe we clear them a bit before heading back south. Impossible to know, but again, some relief should be in the cards, unless this is one of those never-before seen types of bears. Today gave us the first sign of the potential rally, but we still have much to prove before getting up to those 20-day back tests. It's time for the bulls to act. Let's hope they have some guts and get us up for those back tests.

One real hope for the bulls near-term is the clear positive divergences that live on every major index daily chart. Sometimes the rallies off these divergences are muted to some degree due to the bear market just in its beginning stages, but they should allow for upside to unwind and relieve oversold oscillators. Even if they play out a bit, we can be hopeful for a rest from the recent carnage. The Nasdaq has the smallest, but is also the most compressed oscillator wise. A divergence doesn't have to be gargantuan as we all know by now. If it exists it exists, and they clearly exist on every major index daily chart. If they played out in full, the rally up could be rather large, or said better, larger than one might expect.

I don't think they will play out fully, but they are clear and present, and should allow for overall upward movement over time. It would be shocking if we just fell straight back down, but it's hard to measure what negative affect the Fed has had over the past many years, and just how angry the market may be. The monthly charts remain a major sell signal, thus, we can only expect so much from these daily divergences, but I think most bulls will be happy to get whatever they can since the wounds of this year have been so terrible for them. The other good news is that all of the divergences exist in concert. It's not just one sector. It's across the board, thus, there's short-term hope for sure for the bulls. We'll see how this unfolds next week.

When markets get desperate so do some higher ups. I'll leave it at that. Just yesterday I spoke about how the banks needed to firm up for me to get more bullish short-term. It seemed to me that without the banks the market wasn't going to get rocking, positive divergences or not. And wouldn't you know it. Suddenly we hear Jamie Dimon, or the CEO of JPMorgan Chase & Co. (JPM), announce he himself is buying a boat load of his own stock. Very interesting timing. Yes folks, I do believe this came from Fed Yellen. Another bullet. She knows the market was at the precipice of losing the banks, and, thus, I believe they all worked together to make it happen.

Whatever you believe I guess doesn't matter. We got this very interesting timing of a massive buy back by the CEO himself, and off these dramatically oversold stocks went. They need to show some staying power next week so we'll see if they can follow through, but that buy back by Mr. Dimon was clearly the catalyst to get the market rocking higher today. The banks will need to keep racing ahead for a few weeks overall to get those divergences to play out to their fullest capabilities. Bottom line is the market got what it needed before it lost key support at S&P 500 1812. Now we watch to see what it can do to the up side, and whether all of the indexes can rally up to their 20-day, exponential moving averages, which would equate to gains of between 3.5% and 5% from Thursday's closing prices.

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