Stock Market Poor Action Continues....Bears In Control

Stock-Markets / Stock Markets 2011 Aug 23, 2011 - 06:05 AM GMT

I spent part of the day in a hospital, and I'm tired, so tonight's report will be a little shorter than usual.

The market was very oversold on the short-term charts heading into the weekend and when those charts get repeatedly oversold, you get bounces for a small period time. You don't expect the world higher, but you know some type of reflex is on the way. We saw the futures blast up allowing for a higher open. The market tried a bit higher, but failed not too long after the market gapped up. The Dow was up just a little over two hundred points. In bear markets you avoid chasing gap ups. The market spent the rest of the day trying to hang in there, and after going red a few times, it did manage to hang on to slight profits.

The Dow was only up 37 of those 300 plus points, and the Nasdaq was up only 3 points after being up over 40 points. Same goes with the S&P 500. Up over 20 points and ended up only fractionally higher. Again, classic bear market behavior. When gap ups fail they usually do so right at the next resistance level, which in this case, was a gap down across the board, and today was no exception. Bull market rage right through resistance. Gaps struggle a bit but ultimately they get taken out. Not here. Not now. Although we can hang on some this week with the fed due up on Friday, the action today doesn't bode very well for too much sustainable upside action.

The financials were bad again, but it's important to talk about Bank of America Corporation (BAC). This leading bank stock is in deep trouble, and there's not enough attention being paid to it, as far as I'm concerned. This stock is now down to six and change after getting smoked again today. The massive under performance in this stock is scary. Again, few are talking about it as if to say we just want to ignore it all. You won't be able to ignore it much longer if this continues.

Is this American icon going out of business? While I'd like to believe that that has no chance of occurring, you can't ignore the incredible ski slope lower technically. It's a frightening chart to look at. What is the message from this stock technically is what I'm starting to wonder. I can't be sure I know all the answers, but it is plummeting day after day. Small moves up are quickly wiped out.
The rest of the sector stinks in concert. No bid with the Direxion Daily Financial Bull 3X Shares (FAS) at 32 in May and now trading at 11 and change. Amazing to watch these stocks get wiped out. Again, what is the message here? Is anyone listening or paying attention? There doesn't seem so to me. Stay away from these stocks that others are telling you to buy lately. Don't listen to those clueless talking heads who want you to pay up for their bad calls. They want you to bail them out so they can sell your buys.

S&P 500 1165 to 1199 is a huge gap that this market will likely continue to struggle with for the near-term. The bottom of a gap on the Nasdaq at 2437 is the bottom of a huge gap down and that alone will be very difficult for the bulls to get through. Got to 2397 today, well below 2437, and collapsed down over 50 points. This should help you to understand just how powerful these massive gap downs can and will be for the bulls. There is no easy solution to getting through, other than unexpected great news that can come along at any time, although, for the life of me, I don't know what that news could be. It tells us to not chase any strength up in this market.

When I study the charts in detail, I see a move to somewhere in the 1000's in time. At that time I think there is a chance for a strong reversal up, but ONLY for the very short-term. A move up that can likely be played lightly. We could go from 1050, or thereabouts, to 1200. That would be a great move. From there however, I think there's a possibility of even lower lows. We have to take this one slow step at a time. No big time plays on the long side even when I think it's rally time. The daily charts and even some of the weekly charts are telling me that a good low will be in around 1050. I can't be exact at this point, but I think I'll know about where the lows will come in as it unfolds. Bigger picture looks awful technically, if not fundamentally, as well.

Staying slightly short for now. Will go slightly long when the time comes, and then try to get more aggressive on the short side over time when the rally concludes.
It's been a long day.

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.

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.

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