Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Breakout Doesn't Hold...

Stock-Markets / Stock Markets 2014 Jul 27, 2014 - 07:47 PM GMT

By: Jack_Steiman

Stock-Markets

When anything breaks out, whether it's a stock or a single index or the entire market, you need to get a follow-through with power. Not only that, when you break out, you need to power through on the day you actually do so. We broke out over 1985 on the S&P 500, but only by a little more than a point. It held the next day but only added one additional point. A red flag to be sure. Yesterday it all fell apart with a big gap down due mostly to two earnings reports. Visa Inc. (V) and Amazon.com Inc. (AMZN), one froth and one not froth, took it on the chin as both had warnings. AMZN on bigger than expected losses, and V on future growth due to a slowing global economy.


Hey, I thought our leaders keep telling us the global picture is improving. I guess the Government may be giving out some bad information. Anyway, when V warns about global growth you pay careful attention. Both stocks got smoked, and so did our markets. Nothing catastrophic, but enough to cause that breakout on the S&P 500 to go away with a gap down that never got filled. Not what you want to see of tops. We were ultimately able to close off the lows but the technical damage is in place. It will be very tough for the bulls to take back that gap since the market is full in terms of bulls to bears. More on that later on. A solid day for the bears who as usual need to follow-through here. They are not very good at doing that these past many months, but opportunity is once again knocking. The odds are increasing that they'll be able to follow-through, but you need to see it before responding to it.

The bull-bear spread got down to a hair below 40% for the first time in slightly over two months this past week. I am hopeful the start of the move lower is now upon us with Friday's bad market action. How badly does the market need to unwind? Let's just say it is imperative that we start the journey lower, and sooner than later is what needs to take place. The longer you stay severely spread on those bulls to bears the more technical trouble you're likely to encounter as time moves on. You can only pile in so many straws on that camel's back before it caves in and can no longer get up. Too many bulls to bears for a short period of time allows the animal to recover as time moves along. Too many bulls to bears for an overly extended period of time may kill the animal forever.

This is getting dangerous for the bull market. The extended amount of time we have seen this spread over 35%, and yes, over 40% is unheard of. It needs to get rocking lower and not in week or two, but now. The market, for its long term of health, needs a correction, and it needs it now. It doesn't have to be severe. It just needs to be bad enough to allow that spread to get under 30% in the coming weeks to a couple of months. Everything has limits. The bulls need to relax for a few months and let things journey lower to save themselves from losing the bull market altogether. Sentiment is the real problem for this market, not valuations. Valuations are always out of control in the stock market. Even in bear markets there's no reality. The real problem is froth and greed at unprecedented levels for far too long. Here's to hoping we get some selling to get that number to start dropping precipitously. The bull market is depending on it.

Of course we all know by now, that for the bears to gain full control of the markets they need all of the key-index charts to lose their 50-day exponential moving averages. They then need to rally back and test those lost averages on weak volume, and form tails down. Once that occurs you can kiss the market goodbye for some time to come. What a welcome relief that will be. Any selling between here and losing those 50's is meaningless noise. The bears need to eradicate those 50's on high volume with preferably a strong gap down. Once that occurs the bulls will flip to fear and the necessary medicine will be in place. While yesterday felt bad, and while it did cause technical damage, we've seen this script before. Do not get bearish until those 50's are in the rear view mirror after a back test. For now, some exposure is fine above the 50's, but avoiding froth stocks is best. It makes sense anyway. Of course, do whatever feels right to yo

Take things slow here. Maybe, just maybe, the bears can build on things.

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 15-Day Trial to SwingTradeOnline.com!

© 2014 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