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Stock Market Large Tech Red Flag.......

Stock-Markets / Stock Markets 2012 Sep 11, 2012 - 02:27 AM GMT

By: Jack_Steiman


You wait for a moment that tells you it's likely you're nearing a short-term top, and today, we possibly saw that top as the market went after stocks it hasn't touched in months, and it nailed them in a very big way. Apple Inc. (AAPL), the leader of all leaders, was crushed to the tune of $18, while others were nailed with long tails off the top. Stocks, such as Google Inc. (GOOG) and (PCLN) just to name a few. We know we have a negative divergence on the S&P 500 daily chart, so you know it's coming at some point. Not only were some of the best froth stocks hit, but other stocks you don't see get hit very often took it on the chin a bit today.

Stocks, such as The Boeing Company (BA) and 3M Co. (MMM) are two powerful Dow stocks. The Dow has joined its brother, the S&P 500, in flashing a negative divergence, so we have to be very careful here. When those negative divergences kick in, you often see leaders hit hard, such as I mentioned above. None of this means the stock market is about to get destroyed. I don't think it will. There will be plenty of up days, but I do think it will be very difficult for the bulls to get any sustained upside action for a while. Not forever folks, a while. Because the overall trend is higher, shorting won't be easy, but there may be a time, or two when some shorting can be done. Probably the most important message you can take from today is that it won't be easy for a while for the bulls, so you want to move very slowly with regards to new plays. Nothing aggressive right now is the way. Loads of cash is your best friend.

It's healthier for a market to sell off, or at least struggle for significant upside, if it gets too overbought. The charts tonight will show the overbought daily charts and how those 70 RSI's can be the place where rallies go to die for a while. Again, that's healthy longer-term as it resets things and more importantly, a struggling market allows for some real pessimism to come back in as traders get frustrated with a market that can't sustain gains for any length of time. When markets sell or struggle, pessimism creeps in quite quickly. It would be great to see those RSI's on the daily charts get into the lower 50's, or better yet, into the 40's, or possible at, or near, oversold as they approach 30.

Some leaders, such as those mentioned earlier in this report, are really up there with very elevated oscillators across the board. They can't, and won't, stay there forever. A few weeks off to reset way down would be just perfect for more aggressiveness with buying new long positions. We are at a point where we're simply a bit too happy with things and the markets job is to make the masses unhappy. I think that process may be under way, but remember, folks are programmed to buy weakness, so it won't be an easy move lower. Probably a choppy stair- stepping move lower, but you have to be open so some deeper selling if it should hit.

Two major events are upon us this week. One is the announcement of a new product from Apple, with the other being the usual meeting from Mr. Bernanke. The market will be tuned into Apple to see if it likes the announcement, but it may want to sell it no matter what they say. It'll be very interesting to see how the market responds to it. It will be far more interesting to see how the market responds to Fed Bernanke. I still don't believe he will give QE3 quite yet. I think that only comes if the market starts to sell hard and begins to lose key support levels across the board. We'll watch closely as to how the market deals with the news from these two events to give us more insight, but either way, I think for now, all of you need to play far more defensively.



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.

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© 2012

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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