Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Stock Market Collapses Through Support

Stock-Markets / Stock Index Trading Oct 02, 2009 - 03:29 AM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis Article1046, 2090 and 9648 on the S&P 500, Nasdaq and Dow respectively. Those are the magical 20-day exponential moving averages that all went down today without a fight. The market didn't even have to gap below those levels to get the job done. Normally, important levels of support go away through morning gaps but today we saw the bears take control and just destroy those 20-day exponential moving averages.


The market gapped down a bit but traded just above those 20's until 10 am Eastern Time when the ISM report came out showing manufacturing had stayed above the magical 50.0 levels, coming in at 52.3 and basically right on consensus estimates.

In other words, the good news had been priced in. The market plunged instantly and never recovered. A trend down day took place with only minor rallies to work off oversold on the very short-term charts. That didn't stop the market from closing right on the lows. Carnage everywhere. The market spared very little today with the semiconductors, commodities and financials taking it on the chin.

There were other areas just crushed as well. Big cap technology leaders such as Apple Inc. (AAPL), Google Inc. (GOOG), Priceline.com Inc. (PCLN), and Baidu Inc. (BIDU) were annihilated. There was serious damage done to those leaders and this is very telling as they finally gave in to the selling. It took forever as they fought their negative divergences for literally months, grinding and grinding their way higher against the odds. The advance/decline line was ravaged at a rate of nearly 5-1. Volume was very strong.

Not a thing the bulls can take from today that says it wasn't as bad as it looked. There will be no adventures of play that spin doctor this evening. The bears got the job done today and shifted this market to neutral from a buy signal.

Why not a true sell signal yet?

Because the dirtiest of deeds hasn't being accomplished yet by the bears and that's to say bye-bye to the 50-day exponential moving averages. As we put a seal on this day, the market shifted and the bears gained some decent near term control. We have a clear change of character as the first important support level was taken out in seven months. More than just a tiny red flag.

Much to talk about but the question being thrown my way is now what? Is the bull market over? We know without doubt, 100%, that this market goes from bull to bear when we lose, and only when we lose the 50-day exponential averages. Here are the numbers that change daily and are still rising daily. Remember, the 20's are now going to trade down daily as long as we stay below it, but the 50's are still rising daily although only slightly now as we get closer to them.

Let's start by realizing that just about every bull market will test their 50-day exponential moving averages at some point when they get too overbought and those MACD’s just can't impulse up with price any longer. It's healthy and necessary in terms of unwinding the oscillators. I know today feels as bad as it can get but that doesn't mean that the bull market run is over.

I know. It would be so easy if Jack would just say it.

SAY IT!!!

No can do.

It all depends on how far up we bounce and how those oscillators impulse when we bounce off those 50-day exponential moving averages. Although nothing is impossible, if you think we're just going to melt down through those 50's, you're mistaken. They will hold on the first test. Almost guaranteed. As guaranteed as possible when dealing with the stock market. If the move up is reflexive, meaning weak and labored, then the story is likely being written. Buckle up for the next nasty bear market leg lower.

Today will look like candy compared to what will be coming if that's the case. All we can do is learn from the 50-day bounce that's coming. It'll give the necessary insight we will need to have in order to position ourselves for the next very strong move to come. That move being lower. Anything down from here to the 50's is meaningless as they'll hold as I just said. It's really about the next move up off of them. We'll have our answers in a few short weeks about whether the bull is a memory.

When we think of a healthy stock market, the first place you need to look is to those financial stocks which caused this whole mess in the first place. That and Alan Greenspan, the single worst fed Governor in history. Go buy no money down houses folks. Leverage yourselves. Go ahead and have a party. Save my hide and the economy, please. Don't worry about yourselves.

Anyway, those financial stocks took a licking today on gargantuan volume with the charts looking very bad, especially the ETF’s in that area. It won't take much more selling to open the flood gates lower as critical trend lines will be lost and there will be no immediate support to hold it up. The MACD's are pointing straight down and coming off what I'd call basically a triple negative divergence, not that the whole market doesn't have triple negative divergences. When those finally snap it can get bad fast. It doesn't mean it will, and remember, we'll be hitting those 50's soon, but over time, if they do break, the market will take it on the chin in a big way. The financials will offer a lot of evidence about the future soon enough.

Time to discuss those 50-day exponential moving averages and where the oscillators stand at this moment in time and thus why it's almost guaranteed we at least bounce off those 50's first before they would ever break down. The numbers to watch here are 1017 S&P 500, 2025 Nasdaq and 9408 Dow. Again, a quick reminder that they are changing and rising slightly daily.

There are other forms of support between today's closing prices and those 50's but they, in the end, are irrelevant. Only those 50's matter and folks, write them down. I'll update the levels every day. When they are gone, if they go away, the bull is gone and we can throw out the welcome mat to the bear market once again. As I like to say, it is what it is. Don't fight it if that happens. You won't be happy if you're long stocks below those 50's folks. I will only discuss how low things can ultimately get if we do indeed lose those 50's.

I could spend a great deal of time talking about tonight's charts but they're annotated and speak for themselves. They're not pretty. IT DOES NOT MEAN THE BULL IS OVER! It means things have changed and the bull is threatened. Perma bears will laugh at me and say you know the bull is dead Jack. Perma bulls will say thanks for the hope. Truth is it's unclear.

Today was damaging but we're still only testing towards the 50's and that is totally normal, even if it makes the market look like death. There is great danger here. That shouldn't be ignored. Again, listen up. If the bounce off the 50's is weak, buckle up. If it's powerful, you never know. Let the market be our teacher. Don't put you're beliefs ahead of what may ultimately be the final truth. Stay with your bias but be open to all possibilities.

Peace
Jack Steiman

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 30-Day Trial to SwingTradeOnline.com!

© 2009 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.

Jack Steiman Archive

© 2005-2019 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

6 Critical Money Making Rules