Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Breakout Doesn't Hold...

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

By: Jack_Steiman


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 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.



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 15-Day Trial to!

© 2014

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