Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Stock Market Testing the 20's... 50's On Deck....

Stock-Markets / Stock Markets 2010 Nov 16, 2010 - 02:12 AM GMT

By: Jack_Steiman


When the S&P 500 made its measurement at 1220, I had warned quite awhile ago, likely several weeks, possibly a couple of months, that the market would struggle with appreciable upside action. The measurement, once made, is usually reason alone for a long rest with more down side action than up side action. However, when massively overbought daily charts are added to the equation, there's enough reason to now bring the markets lower for a while in order to rest. To unwind those massively overbought oscillators. It's healthy and quite necessary. You can only get so overbought for so long before the rubber band snaps and brings things back down.

Before the selling is over it would be great to see all stochastic's on the daily index charts get to oversold levels, meaning 20 or lower, the RSI's get to 50 and hopefully lower, and the MACD's get to the zero line or lower. The more oversold the better. This is how the market can then try to go appreciably higher once again. Any upside from here would be contained to small gains simply because we haven't gotten those oscillators unwound enough. The more we sell, or keep the trend lower for a while, the better it'll be for the market bigger picture. If you want higher markets then rout for this market to struggle for a while longer. It should.

Today we saw the type of market associated with a market ready to move lower, or at the very least, struggle with much upside action. It gapped up higher due to the 60-charts being oversold. Some quite a bit so. The market tried numerous times to make a big run up. It was moving up off the gap up opening. This is normally associated with a market ready to go higher and higher. Not to be this time, however.

The market ran out of steam pretty quickly and then spent the rest of the day slowly giving up the gains with the Nasdaq actually going red at the end of the day, basically closing on its lows. The theme here being early morning strength is being sold off as the day moves along and then we eventually close to, or very near, the lows. This is a change of character from what we've been seeing the past several months. Good news not being bought up such as the good retail sales report this morning pre-market. Late selling is a clear change of how things have been going. This tells us that we're going to struggle for some time to come. Nothing necessarily horrific, but definitely not the action that supports higher prices overall. Rather, it tells us we should drift lower over the next few weeks.

It's very normal, once markets have topped for the reasons I've discussed in this letter earlier on, for all the major indexes to back test their 50-day exponential moving averages. This allows for the unwinding we're all looking for. The first part of this process is to challenge those 20-day exponential moving averages. You bounce around this level for some days, but eventually break below on a closing basis and test down to those 50-day exponential moving averages, or at least very close to it. Sometimes you fall a little short of getting there. Sometimes you test perfectly. Then there are other times when you are mentally tested when the 50's actually get breached to the down side. That's the more emotional of the scenarios. Hard to say which will play out, but none of that really matters in the end. Just be aware that some form of this test is likely to happen in the days and weeks ahead.

The 20-day exponential moving average on the S&P 500, Dow and Nasdaq are at 1196, 11,204 and 2515. On the close today, the Dow breached by a few points, which is truly meaningless, and the Nasdaq closed below by two points, which also is non-confirming. A close one percent below is more indicative of a true breach and loss of these levels but we have a start. There could be a small bounce off these levels, but sooner or later a test down to the 50's is likely, and those levels are at 1168 on the S&P 500, 2436 on the Nasdaq and 10,986 on the Dow. The Nasdaq is the strongest of the indexes with the S&P 500 a close second. The Dow is the weakest by far. When the market is ready for more upside down the road, the Nasdaq should lead once again.

The market simply needs time folks. Let's not give away hard earned gains by over playing our hand here. Let's not get aggressive on either side of the trade for now. It's time to be playing much lighter than we have over the past several months. Just go slow for now and allow things to set up all over again down the road. Some weeks from now. Just go slow and easy here.



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 constitutinginvestment 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