I'm personally wondering if the market is sending a bigger message than just Washington these days. Why? Because the weekly S&P 500 chart has a triple-negative divergence, and the deeper message may be that it's time for a prolonged nasty period here. My thinking is this. If you study a stock like American Express Company (AXP) you get some insight. This stock found itself with a hollow candle three days back right on the 50-day exponential moving average. It followed the way it should with an up day yesterday. MACD was turning up, which is appropriate. Today, no follow through. In fact, a hard nasty fall with a full candle below the 50's. Not bull-market behavior. It doesn't mean a bear market either.

It likely means it's quite possible we have a long period ahead of mostly downside action. How can we know this is a reality? The answer is easy. The reaction of the market in the days ahead, once we get a resolution in Washington. One will come. The futures will rise. The market will gap up. If from that point the market falls the rest of that day, and puts in a poor candle, I think we'll have our answer: a decent period of downside action is upon us. It could mean 1500's for the S&P 500. It doesn't have to, but if we sell once we get a settlement out of Washington, then its look out below. So yes, Washington is the focus. And yes, we'll rise initially once they settle. But the real insight comes once the gap up occurs. Very interesting times.

The market started out poorly today after the puppets ran around, but they couldn't get together in Washington. It rallied once things got very nasty, then fell, and then rallied, and then....! You get the idea. No one knew what to do today, but in the end, it was just another down-day as the market tries to understand the political picture, while dealing with negative divergences on the S&P 500 and Dow weekly charts. There is no negative divergences, however, on the Nasdaq so that's a ray of hope for the bulls, but it's severely negative on the Dow and S&P 500.

The market rose a bit when the usual news came out about this one and that one getting together this evening to talk things through in the hopes of finding an agreement. The market flopped about all day because of the lack of knowledge it's dealing with now. If we get nothing tonight out of Washington we could get smoked tomorrow. Futures are down fairly hard early on this evening so we shall see. The market needs certainty. That's why it struggled today to some degree, whether or not the weekly charts were involved or not, and will struggle further on the news from Washington, if it continues to be poor. The market is sending a message that few at the top care about.

The market is down eight out of the last ten days. Not pretty. Monthly charts are working off overbought, which isn't good news for the bulls either. The weekly charts on the S&P 500 and Dow are sinking. They are being affected by those negative divergences. The S&P 500 is still above critical support at 1674. A close below opens the door to 1655, and then horizontal support at 1627. Below that we see 1598. The market futures are very unhappy this evening. If nothing gets worked out this evening, if there's not even some hope, tomorrow could be very nasty.

We also look ahead to the Jobs Report on Friday, which will be a market mover. And, oh, by the way, unfortunately for the bulls, the spread is now up to 27.3%, even with the mostly poor action last week. We're closing in on 30% again. Bulls don't want any part of that. Bottom line is the bulls need some good political news and fast.

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.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.