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
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
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Trying To Carve Out A Bottom...

Stock-Markets / Stock Markets 2010 Feb 13, 2010 - 07:59 AM GMT

By: Jack_Steiman

Stock-Markets

But you know it won't come easy folks. Once we broke down below the 20- and 50-day exponential moving averages, back tested and fell again, the trend changed from up to down. breaking trends, once in place, is not an easy chore. So you try to look for small clues that suggests that if the trend hasn't changed yet back to up, it is certainly trying to put in a low for this strong move lower off the 1151 top on the S&P 500. A process that can feel like you just sat in the dentist's chair for a few hours. It leaves you stunned and battered. At least that's how I feel when I go to the dentist.


Violent swings up and down that feels good in one moment and not so good the next. The action is getting very violent here. So where do we look for those clues regarding the fact that the low is likely in on this correction. One area I look at is the action in the PowerShares DB US Dollar Index Bullish (UUP) or the ETF representing the dollar. It has been on a tear to the upside the past month plus and has taken the market down with it, especially many of those commodity stocks. Then UUP has been straight up but today it printed a nasty black candle meaning it gapped up but closed lower than the gap up open. Strong on balance sellers after a huge run up is usually the end of that trend, at least for the very short-term.

In addition, its oscillators have risen way up to the top of their channels and the stochastics are printing a massive negative divergences. No bad divergence on the MACD but clearly one on the stochastics. This combination of high oscillators, a black candle and negative divergences on the stochastics tells me that the worst of the market correction has already taken place. Of course, there are no guarantee's and this is why you still have to have your guard up but you have to go with the message being sent. Also remembering that it doesn't mean the whipsaw is over. It won't be easy but that's my thinking.

Let's discuss why I think today's black candle on the UUP means we should have at the very least an equities bounce. Black candles represent reversals ONLY when its come off a long and explosive move higher on any stock or index chart. If you study the UUP chart you will see that it has made that very powerful move and then the black candle today. In addition, the black candle is most accurate when you have RSI's at very high levels, usually 60 or higher. it occurred today at roughly the 67 level, very close to that magic 70 number. In addition, to cap it off, black candles work best when there's some type of negative divergence on the daily chart on one of the major oscillators. We have that now on the stochastics and they're from high levels as well. If black candles occur at the lower end of the oscillator trail they're not very useful. If there's no divergence negative or no strong move in place they're also useless but again, there's a lot of evidence that this black candle is significant and should at least offer a bounce in equities early on next week.

Today the market opened lower with help from overseas negative news from China regarding bank regulations. A good retail sales report pre market couldn't help the futures recover. We opened lower and ran down hard with the Dow down approximately 160 points. Ugly and it looked to be getting out of hand. The Nasdaq was down roughly 20 points but one thing was clear from the start and that was that the Nasdaq was performing better than the S&P 500 and Dow and when this happens there's hope. Just when things looked bad the markets started their reversal higher. This coincided with the black candle getting started on the UUP. The lower the UUP went, the higher up the market went.

As the day came to a close, the Nasdaq closed basically on its highs while the S&P 500 and Dow were down but well off their intra day lows. On this push down we wound up putting in a higher low and that's a positive as well. The Dow and S&P 500 also printed hollow candles and also printed inside days. Never a guarantee but the evidence points to higher prices early next week. The market did well for itself today although it's far from out of the woods as there's all kinds of resistance from gaps to moving averages not far above today's closing prices.

2190 Nasdaq and 1090 S&P 500 are gap levels this market needs to take out. it's a good thing we took out the gap downs from today with the late reversal or we would have had two gaps to get through and we all know one can be hard enough for the bulls once a down trend has been established such as we have now. If we can get through those gap levels at 1090/2190 then we can deal with the next headaches, the 50-day exponential moving average at 1097/2202 on the S&P 500 and Nasdaq respectively. If we get through those levels then we can move appreciably higher. The 200-day exponential moving averages are still the final line in the sand for the bulls should things head much lower once again. 1066 and 2047 those levels and for now they're not in danger but we have to keep an eye out just in case.

There are lots more stocks near the bottom of their oscillator cycle or wedges showing some positive divergences on their daily charts along with those oversold stochastics and RSI's. This too is reason for hope for at least the short-term here. When you get the majority of stocks down to levels just explained, it's hard to continue to press on them to get lower prices still. They're oversold and need to bounce up at the very least. Add in sentiment which has turned from a bearish signal to a more bullish one, there is hope that this whole move down was simply a sentiment correction I spoke was inevitable before it occurred. 37.5% more bulls was too high. Now it's 8% and maybe lower. Nothing is etched in stone here but I do think we have a good chance at moving higher short-term. Stay nimble.

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