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 Bounce No Follow Through...

Stock-Markets / Stock Index Trading Feb 08, 2010 - 05:10 PM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleAnd that's what everyone was expecting after that wonderful hammer on all the critical index charts in the last hour on Friday. The S&P 500 touched the 200-day exponential moving average at 1046 (1044 print) and then burst higher. It was the first test in an extremely long time and after losing the 20- and 50-day exponential moving averages, one would think that whichever index got down to the 200-day exponential moving average first would give the market a quick blast higher and that's what happened.


The key is following through on the next day’s action. Does it follow through or just die? It simply died today. It didn't get killed. Nothing bad like that, but where's the follow through that should take place? It was nowhere to be found today. Not what the bulls want to see and puts the recent down trend more in focus. We had the breakdown and retest and then follow through lower. Today we didn't get a follow through higher one would expect and thus the down trend remains confirmed. Yes, things can reverse but the onus is on the bulls to make that reversal a reality. The bears control things for now.

After the close on Friday, it was reasonable to expect the overseas markets rally higher. When they rally higher it basically always boosts our futures allowing for a gap up out of the gate. Asia had no rally and Europe was surprisingly flat. No big rally overseas led to flat to slightly down futures on our end. No gap up to be found.

After falling early, led by the Dow, the market came back strong, erasing a 70-point loss in the Dow. The Nasdaq went very green, up around 10 points. The S&P 500 also went green. It did not last. Once the market got back those losses, the bears took over and caused a slow but steady turn downward as the day went along. It accelerated in the last hour, allowing all the major indexes to close on their lows. Very poor action for the short-term. The bears stepped up when they had to no doubt. The bulls did not.

The hammer from Friday now a thing of the past. The action today does not mean we fall apart. The closer the indexes get to their 200-day exponential moving averages, the harder it will be for the bears to hold off the fighting bulls who will give all they have to protect those critical 200-day exponential moving averages. A deep close below those 200's across the board open up the bear market conversation. For now all we know is that we're in a down trend that was confirmed when we back tested those lost 20- and 50-day exponential moving averages. From there we continue to fall gradually. The bulls need to now focus on protecting those 200's below current price.

There is a pattern worth noting when markets are in more of a down trend. You often see some early day strength that turns to a churn that ultimately turns to late day selling. This is the pattern that's starting to emerge with more regularity. When the market was rocking in bull mode, we saw some early selling turn in to late day buying. That's when you know you're in a bull. Folks can't wait to buy up weakness. Now we are seeing folks anxious to remove themselves from stocks once we head higher. A change of character worth noting for now. It can reverse back at any time but worth noting as we can watch to see how long this overall process continues, especially if we ever lose those 200-days across the board. If those ever do get taken out, this process of late day weakness will become common place.

We saw some terrible action from the financial stocks today, and in particular, I am watching the action from Citigroup (C). It is now trading at the poorly priced IPO secondary. It was supposed to price at 3.50, but eventually priced at 3.15. It traded down to intra-day 3.13 before rallying back some weeks back. Today was its lowest close in this down turn since the secondary and a close below 3.13 opens the door to much lower prices not only for the stock but the financials and thus likely for the market. Bank Of America (BAC) along with Wells Fargo (WFC) also had terrible days today. JP Morgan Chase (JPM) also struggled although not as badly as those just mentioned. Bottom line is the financials were awful today and when that happens as we near critical market support (200-day EMA's), we have to watch carefully. The financials need to hold here or things will get more than interesting.

We had the first close below Dow 10,000 in quite some time today and the first time since it started to fall from just over 10,700. It has found a way to hold above and losing 10,000 isn't necessarily a bad thing as it's still above those 200's, but it is psychologically damaging to some degree. The bull market carried the Dow over 10,000 and ever since it has been a feel good story to have the Dow back above the 5-digit mark. If it stays below for a while, it will start to become very difficult resistance on any bounce back up.

The real line in the sand for this market is those critical 200-day exponential moving averages currently at 9768 on the Dow. The levels on the S&P 500 and Nasdaq are 1046/2062 respectively. Those levels now become the key to this market future, although, we know they change slightly from day to day. The bulls have their work cut out for them as do the bears. Both sides will struggle to do their work necessary to have their side in total control. The bulls need to ultimately get back through gap and 20/50-day resistance but for now they are more focused on holding the 200's.

Play it slow and safe here, please.

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 21-Day Trial to SwingTradeOnline.com!

© 2010 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