Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Rough Few Days For The Stock Market Bulls....

Stock-Markets / Stock Markets 2011 Feb 24, 2011 - 03:31 AM GMT

By: Jack_Steiman


Markets tend to catch the masses off guard. It's an old story with the stock market. The bull-bear spread has stayed quite high, and actually increasing in the number of bulls, and decreasing in the number of bears over the past few weeks. More and more are getting bullish which explains how the weekly charts got so extremely overbought, especially on the S&P 500 and Dow. High-70 readings on the Dow, and mid-70 readings on the SPX said it was time to reign it in some.

There was trouble over the weekend in Middle East. This was the excuse, or catalyst, to get those overbought oscillators to unwind lower and allow for some decent selling. Our stock market had been grinding up for quite some time with tiny candle sticks that way day after day.That's the first red flag indicating a pullback isn't too far down the road. Poor MACD's, along with not so great looking RSI's and stochastics, were also red flags to start removing long positions late last week.

All of this led to a big gap down yesterday that tried to come back early on today, but was rejected by the bears. The bulls finally saw it wasn't coming back, thus, a long squeeze was on. Nasdaq fell nearly 80 points in a day as the big caps were slaughtered. The market followed through today, but got grossly oversold on the 60-minute charts, which allowed the indexes to close off the lows. Some stocks, such as Netflix, Inc. (NFLX), Incorporated (PCLN), Research In Motion Ltd. (RIMM), and others took it on the chin again, however. Ugly sticks over the past few days, which saw stocks take out many weeks of gains, if not months, in just those couple of days. Many also lost their 50-day exponential moving averages.

When things give it up, they can do so quickly, and it can take the human brain from complacency to fear very rapidly. That's what causes the long squeeze. Bottom line is, things aren't great for the short-term and there will be lots of bounces, but the near-term trend overall will be somewhat lower.

Only when we lose the 50-day exponential moving averages on the major index charts can the bears get happy for real. This is all just a gnat of selling thus far. Nothing from nothing, really, bigger picture. Sure, some stocks are really crushed, but the overall market hasn't seen anything worth talking about. Just a few percent down off the top. Only if the 50-day exponential moving averages get taken out with force can the bears say we have a genuine selling period we can feel surer about. Until that happens they've accomplished nothing to be blunt. A start for sure, but if they want to see a 10% or more correction, they will need to remove those 50-day exponential moving averages, and then the selling will kick in big time. I'll go over those numbers later on in this report.

Everything has to start somewhere, and the fact that the bears have a nice huge gap to work with on the index charts and on many leading stock charts, they can feel there's hope, after all, for some gains on the short side. It won't be easy getting back through these large open gaps, so the job should be a bit easier to get selling when needed. Bottom line is, the bears have gotten the ball rolling. They must now remove those 50's, and then they have something they can brag about. Until then it's just meaningless selling from overbought.

The key element to understanding a real pullback is whether selling is across the board or not. The market has seen money rotate around that has not allowed for much selling. We're seeing a change of character on that front now. Money has stopped rotating the past several days, which is allowing for more intense selling across the board. It seems as if the big money has decided now is the time to let things unwind for a few weeks, and that would allow for a much better buying opportunity.

Market needs periods of longer-term unwinding of its oscillators if it's ever going to move appreciably higher once again. RSI's can't stay above 70 on the daily and weekly charts forever. It's healthy and necessary to get deeper selling for some weeks. It's no different this time on that front. Notice how long we've been grinding higher. Not good. The deeper we sell over the coming weeks the better off we'll all be for the bigger picture bull. If the selling stops suddenly we'll be overbought in no time once again. For now, the market is following the type of script that has led to stronger periods of selling. As long as we don't see real rotation then the selling will continue for a while longer, even if the oil, gold, and silver stocks keep rocking due to the problems overseas.

Critical long-term support comes in at those 50-day exponential moving averages. On the Nasdaq it's at 2715, where there is also strong support on gap. If the Nasdaq loses 2715 with force the selling will really accelerate. It tried to lose that today, but we were too oversold with 10 RSI's on the Nasdaq 60-minute chart, thus, no success today there for the bears. That's the number to watch for in the days and weeks ahead.

2715 is critical for the Nasdaq bulls to hold. On the S&P 500 the level is further away. 1286 is that number, and we're still quite a ways away. You really need to understand, folks, that unless those 50's get taken out, the bears have accomplished nothing worth talking about. They will work hard in the coming days and weeks to get things accomplished on that front. The Nasdaq would be the first to go if things keep as they, and I, expect them to remain as they are, because the highest froth stocks get taken out first, which are clearly the Nasdaq stocks. The world of no reality lives in the Nasdaq, thus, that's where the bears will look to attack.

The market has started to sell, but nothing has really been accomplished. Selling through critical support is never easy in a bigger picture up trend, but many leading stocks have lost those big time 50-day exponential moving averages. First leading stocks go as they are doing now, and then, ultimately, the indexes go as well. The bears have gotten some of the job done but not all of it. A day at a time folks. Markets are oversold on the short-term charts, thus, as usual, the job won't be easy for the bears, but we do see a change in character for this market, thus, be VERY CAREFUL out there for now.

Cash is a position and where we need to be for the moment.



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