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
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Minor Pullback On The SPX/NDX Off 70 RSI's On Daily Charts...

Stock-Markets / Stock Markets 2011 Feb 10, 2011 - 03:16 AM GMT

By: Jack_Steiman


You wouldn't call this a strong, or a major, pullback, I'm sure, but it was a pullback to some degree, nevertheless, especially on the Nasdaq and today's lows. RSI readings on the S&P 500, Dow, and Wilshire all hit 70 Tuesday, and thus, it should come as no shock that the market made an attempt to sell off some today. In the end, however, it didn't do a whole lot of selling successfully as the buy-the-dip bull crowd came in again today when things started to really move down. The interesting thing about 70 RSI readings in this bull market is that it has rarely stopped individual stocks from moving higher if they're in the right type of bullish pattern. The RSI readings often get well in to the 70's if not the lower 80's. This is not normal behavior, and shouldn't be looked upon as such, since normally, 70 will stop stocks dead in their tracks.

However, this bull is quite strong even though it's very much in need of selling, and that's why, even though we hit 70 RSI's on those daily index charts, the selling wasn't very intense at all today. The once 70 RSI readings are now down in to the lower and middle 60s, which isn't great, but once we are below 70, who is to argue that we may just blast right back up. It would be best if that did not happen as a more prolonged rest would be some good medicine, but you don't bet against the trend in place once you get even a drop below overbought conditions. Solid action for the market, and for the bulls today, due to the fact that you normally see more intense selling when the RSI's get this overbought.

When I looked around it was clear as can be as to who took the biggest hit today. The commodity world really took it on the chin. Many big leaders, such as Walter Energy Inc. (WLT), broke down badly below their 50-day exponential moving averages on very strong volume. Not exactly what you want to see if you're going to remain in a bullish pattern. Maybe this action is a future sign of things to come for the whole stock market. The commodity world has been the biggest beneficiary of this bull run, and maybe, just maybe, it's time for everything to start to go down.

When the leader up starts to sell hard it is a red flag, although it could just be that they got too extended and needed to come in a bit. The problem is the breaking of those 50-day exponential moving averages. That isn't something that has happened since about ten months ago when they began their journey down. It's too soon to say they're broken, for something lost today can be gained right back tomorrow. It's just interesting to watch these break some in a way they haven't for nearly a year.

I have been getting a lot of questions about the strength of this market and why I think it's holding up. From a fundamental perspective we've gone over it too many times. It's all about printing press Ben. However, from a technical perspective it's more interesting. If you study the Standard & Poor's Depositary Receipts (SPY), Diamond Offshore Drilling Inc. (DO), or better yet, the Nasdaq, you can see an endless number of gap ups in the pattern, with many of them very close together in price.

Gaps are areas of support that get bought up in bull markets. The more gaps you have the more difficult it is for the bears to get anything rocking. They get lucky enough to take out one gap, but then run in to another that gets bought up with force. Moving averages are key as well, but the number of gaps far outnumber the amount of important moving averages that are acting as support.

If you add the moving averages, along with the gaps that are protecting, you can understand why the job for the bears has been so tough. Printing press Ben is huge, but so are those gaps folks. Printing press Ben is the one who created them so the bulls have him to thank. Now those gaps are acting as wonderful support for the bulls as things sell off from time to time.

Let me give you some insight as to the strength of this bull market, although remember, at any moment we can have a strong pullback to unwind thongs. We just got one of those possible catalysts in Cisco Systems, Inc. (CSCO). Awful earnings report with the stock slaughtered from a percent perspective after hours. It's down 6% as of the time of this writing.

The reaction from the PowerShares QQQ (QQQQ)? Down six cents or three points. Seriously? In normal times, if Cisco was down 6%, the Nasdaq would be gapping down 40 points. Maybe more. The market simply is rotating its dollars to whatever is working, or perceived to be working. It tells you the bull market is still on, but we could sure use some selling to get things more to a buy point so numerous new plays can be taken on. One day at a time.

Be kind to someone simply because you can.



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!

© 2011

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