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
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20

Market Oracle FREE Newsletter

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

Stock Market Establishing A Range?...Froth Destroyed....

Stock-Markets / Stock Markets 2011 Oct 20, 2011 - 03:49 AM GMT

By: Jack_Steiman


The market has made a run from S&P 500 1074 on an intraday basis all the way up to 1233. An incredible move. No one is unhappy about this move who played the long side today. The short side got hit hard, especially the crowded trade down at those lows. Loads of shorts just coming into the short side thinking at the lows. That's about par for the course in this emotional game. After such a strong move, and especially since the move has taken us up to key resistance at 1235, it would be very normal for the market to calm down for a while and trade in a range. That range looks to be setting up between the 20-day exponential moving average near 1180 and the 200-day exponential moving average at 1235. That's 45-point range, or just about 4%.

This is key for the bulls. They have made a nice strong journey up off the lows, but have done nothing in terms of creating doubt about whether we're still in a bear market. The bulls would have to blow through the triple bottom breakdown at 1260 to start thinking they've done anything truly worthwhile. If the bulls can keep the market calm for a week, or longer, and hold above 1180, or at least close to that level, they can feel better about making another attempt at removing 1235, which would then open the door to challenging 1260. It looked like a slam dunk yesterday as the market was racing up, hitting 1233. That's when the bears reminded us of how tough a market this truly is. We closed today at 1209. They got the job done for the short-term, which again, seems to be setting up the range between the 20- and-200 day exponential moving averages. If the bears can forcefully remove 1280, they will have taken a step towards moving the market down a full support levels further. So, for now, the market seems tired, and it would be natural to see a period of basing within those two key moving averages. Now we'll see if the bulls have what it takes to keep things from falling apart.

Why would anyone question whether the bulls can hold the line here while we unwind? Simple really. We're losing our highly weighted leaders during this earnings season. Two days ago we lost International Business Machines Corp. (IBM). The leader of leaders in the Dow. That's a monster stock that has raced higher and led the way up. It disappointed on their earnings report and was crushed lower. The gap down and follow-through today putting it in not-so-great shape technically. The volume confirmed the drop. Not good news for the bulls. However, the market hung in well and moved higher without it. Today, however, we lost Apple Inc. (AAPL) from a technical perspective. A massive gap down on volume that tried to recover but failed miserably. That's two down.

Today the Nasdaq couldn't recover and underperformed all day in a very big way. Not good. Tonight we lost heavily weighted Nasdaq stock eBay Inc. (EBAY) as they, too, disappointed on their report. Down roughly 5% after hours. If this holds tomorrow it, too, will have suffered tremendous technical damage, which will be confirmed by volume. Again, not good. Give the market credit for trying to hang in there with IBM's bad news but, it's getting harder and harder to do so as we lose more and more leaders on their earnings report. This doesn't exactly bode well for higher market prices. The best we can hope for is for the market to hang tough while these stocks find their bottoms down the road. The key here is that none of those three stocks are froth stocks. All low P/E stocks and leaders. It's troubling.

I just spoke about non-froth stocks getting hammered on their earnings reports. Let's now look at stocks getting hammered without having earnings reports yet. There are numerous froth stocks out there not worth close to what they trade for. Froth, if you will. Pure froth. These stocks are getting smoked in a big way. Inc. (AMZN), Green Mountain Coffee Roasters Inc. (GMCR), Incorporated (PCLN), Baidu, Inc. (BIDU), just to name a very few of them. Scores of them from all over the stock market world.

Some of these have a strong weighting as well as those non-frothy stocks I mentioned. Add onto the amount of stocks we're losing as leaders. Those froth stocks are wonderful in as bull market, but I don't believe we are in a bull market, thus, you should be avoiding them at all costs. As the market has climbed, these stocks have been crushed. They're breaking down all over. So, when adding up the froth stocks getting hit hard, along with major non -froth leaders getting hit hard, it's tough to imagine the market breaking out unless we can somehow hold the line here until they find bottoms. It's possible, but whether we do or don't hold, avoid those froth stocks with ridiculous P/E's.

Sentiment is still on the side of the bulls. The new numbers out today, as of the close last week, showed the bears are still overpowering the bulls. An inverted spread of 5.4%, or the fifth consecutive week that the number has been inverted. We're coming off two straight weeks of negative double-digit readings, but -5.4% is still a nice inverted number for the bulls, and thus, the market is likely to at least try to hang in there for a while longer. I would think we'd still need more optimism for this market to finally start another strong leg to the down side, but I guess you never know. Normally that's how it would be. A recession becoming a reality in this country, or a major default in Europe, will make sentiment a moot point. The market will get annihilated if either of things occur. It has worked very well over the past weeks. The bulls couldn't have asked for more, and with the reading still negative, the bulls have a shot at another move higher. But don't get too excited now that we're near 1235. The bulls still have their buffer if things don't get silly bad regarding news in the weeks ahead.

So, we take this day by day knowing things aren't good in the world. You have to be very nimble. You can't over trade. You take gains fast and sometimes get out flat if need be. Not a time to play hero. Stay away from high P/E stocks and simply out, keep things appropriate so you don't get your head handed to you. Nothing bad for now, but the market is losing more leaders for the short-term, thus, nothing is likely to be easy for the bulls from here.



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 constituting investment 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