Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

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