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
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
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
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 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
ARE YOU LOVING YOUR SERVITUDE? - 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

Greece Debt Default On Deck.... Stock Market Anxious...

Stock-Markets / Stock Markets 2011 Sep 10, 2011 - 12:24 PM GMT

By: Jack_Steiman

Stock-Markets

Late this morning, after the market started recovering from its early move lower to start the day, there was news from Germany that Greece was likely to default by some time next week. The Dow fell two hundred points in a very short period of time as traders and investors started removing themselves from long plays. Hard to blame them, of course, as this type of news, should it become fact, would be devastating for markets around the world. The market spent the rest of the day spinning and churning once we got to -300 on the Dow. There was no collapse past that initial move lower off the news, but no real rally either.


The bulls might want to say the market handled the news just fine considering the ramifications. The bears would say this is just the beginning, as once default becomes fact, you'll wish you were out of the market. The news from Germany put the masses in a defensive posture, but the fact that the news isn't a reality yet, kept things from getting out of hand. Nothing good can be said about today's action. It was a bearish day within the bigger picture bear market. We have yet to break down, and that's the one hope the bulls can hang onto momentarily.

But the pattern in place doesn't bode very well bigger picture as today's action put a big gap in place. Getting back through it will be incredibly difficult. This gap is also well below important resistance, so you could say today was rather damaging to the bulls. There's nothing positive to claim as far as I can see. Technical damage, along with fundamental damage, is not a positive by any means, even though we're still above key support. Today's action made the bear flag in place stronger technically. Today's action tells us all to be in a very defensive mode of playing.

So let's talk about these bear flags on the major index charts. Even though the flag runs down to 1101 in price, there's a trend line that runs right through S&P 500 1155, which is where we closed. A gap down below at some point would be very bearish technically. The dollar closed up powerfully and is in a bullish trend, but it's seeing 70 RSI's getting printed. If it pulls back briefly then the market could get a weak bounce up here and hold the trend line. But that may be short lived. The bear flags are mature, and my guess is that they get a lot more mature before they break down, except for the fact that we are dealing with the Europe news.

Bear flags have no real time table as to how long they can last. With sentiment as it is, the ones in place here could last for a few more months. They're already five weeks old, and thus, it's not impossible for them to break now with the right news. Again, Europe would be that right news. If Europe's default doesn't happen now, you could be looking at ten, or even fifteen, weeks before it gives way below 1101 S&P 500. So the pattern is maturing. It can run much longer, but the news will rule the day.

Some time needs to be spent here talking about the PowerShares DB US Dollar Index Bullish (UUP). It has broken out in a big way and is acting as if the lows are in for years to come. There was a time, historically, when the dollar and the market moved together. Those days are over for now. A strong dollar is not good news for this market. The breakout in the dollar is very significant. It took out all three key exponential moving averages in days. An amazing jump up that says the dollar should only strengthen overall for some time to come.

If the current correlation holds, this would be very bad news for the stock market. Yes, it is overbought, and thus, could pull back some in the very short-term. But the power and force behind this rocket-ride higher should be taken seriously when understanding where it wants to go medium-term, if not longer-term. Unless things change in terms of how the market has been moving, versus the dollar, things do not look very good for stocks for quite some time overall.
So, what's spooking the markets and where does the market go depending on what actually does take place?

There are really two issues that matter. Sure, there are the other headaches, such as no faith in our political leaders. That does have some effect on equities, for sure, but there are much bigger issues other than the lack of confidence in our elected leaders. The two issues at hand are: Europe and defaults, and the potential for the United States to go back into recession. Our leaders can continue to do a bad job, but if these issues didn't exit, the market would be exploding higher.

Issue number one is Europe. Greece looks ready to default. Germany warned everyone of this today, and although Greece denied its truth, there is no reason for Germany to put up the red flag if it didn't see it coming. Beyond Greece, there is the domino effect. Where there's smoke there's fire. If Greece defaults, the worry will then be who's next. Even if there is no other cause to panic, the belief that there could be others to come, will cause panic in the markets. Defaults are unacceptable for this, or any, market. And it doesn't look like any white knight in any kind of armor is going to be running in to save them this time. If they do default, and no one saves the day for them, it's lights out for global markets.

Issue two is right here in our country. Recessionary economic reports are coming in. Not all of them. The message is a bit mixed. The market seems to be waiting for more clarity on this issue. The markets here could not deal with a recession. P/E's would get smoked, and thus, so would the market. It's entirely possible that no one in Europe will default. It's entirely possible that we will not see a recession in the United States.

Nevertheless, the market is falling, but not crashing, because it's looking for more evidence as to the odds of what will take place. It doesn't like what it sees, but it also doesn't know for sure. So, it's hanging on by a thread. If both events come true, look out below. If only one does, it'll get nasty, but not insane. If neither occurs, the market will ultimately blast higher. The market sees bad outcomes, but only time will tell. We let the market tell us how to respond. Right now it says extreme caution is advised.

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.

Sign up for a Free 21-Day Trial to SwingTradeOnline.com!

© 2011 SwingTradeOnline.com

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.


© 2005-2019 http://www.MarketOracle.co.uk - 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