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
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Gives It Up.....

Stock-Markets / Stock Markets 2014 Oct 11, 2014 - 02:40 AM GMT

By: Jack_Steiman

Stock-Markets

In a big way. This was inevitable. The market couldn't stay up as it was forever based on the degree of froth it was dealing with on a daily basis for many, many months. Actually since late February. Froth can take a market higher than anyone thinks possible, but it is amazing how fast the carnage can come. How fast things actually fall. Months of upside can be wiped out in days or weeks. The grind to the upside seemingly never happened when you look at how fast those grinding gains are wiped out. This is how corrections and bear markets work. They are very intense. They create tremendous emotion. Fear ramps very quickly.


Markets have a way of fooling everyone, because froth gets to a point when the complacency is locked in. The market can never fall attitude. No worries. All is fine. Every dip is bought and so on. The masses rush in at the top and get smoked Let's face it folks, the froth in some of these stocks is simply off the charts, so now the market will correct them, because the rubber band of complacency has snapped. It won't be straight down. There will be lots of rallies along the way. Massively oversold rallies. News rallies. Fed rallies but the market has a shot at a very deep correction here. The 1700's on the S&P 500 are very doable, and if we can get there that would ring out all the froth we've been dealing with as of late. When markets snap, your best friend is patience and cash. Just the reality of things folks. If you don't have patience you'll likely suffer some terrible losses needlessly.

Let's discuss froth and the journey it has been on for the past eight months. The bull began and things moved up slowly with regards to froth. No one truly believed the market could rise very much given the global situation economically, but with the Fed on its side the market kept rising, and folks were getting anxious not being in for the ride higher. Slowly, but quite surely, more and more folks turned bullish and with the Fed promising low rates basically forever, it finally sunk in that every pullback was being bought because the Fed was not allowing folks to put their money anywhere else.

Naturally this created more and more belief in the bull until things got euphoric. A bull-bear reading on a ridiculous 46.4%. Bears down to 13%. Unheard of readings of froth and complacency. The froth reaches the stage of being full for the bulls, and then it all starts to fall apart. And it can fall apart quite rapidly. In time the cycle completely reverses and there will be far too many bears and the spread will go from its peak of 46.4% down to 10% or lower. Wash, rinse and repeat. The spread should now be well below 30% for the first time in those eight months. My guess in the mid 20's when we get the new reading next Wednesday. We shall see, but, for sure, things are calming down quickly on the froth front.

So where do we go from here you ask?

Well, we are getting extremely oversold, and we're testing the 200-day exponential moving average at 1900 on the S&P 500. One would expect a rally of some type off such a key moving average, especially since it hasn't been tested in what seems like forever. It has been years since a full test, so I would think we'll get a bounce here, but you cannot be sure about it since we are unwinding such intense froth. I remind you that the froth we have just dealt with was historical, thus, there's no way to judge if we'll bounce where we normally would expect things. This is a very dangerous market for the short term. A few months of this correction will make things much better for the bulls. My suggestion is easy does it for those few months either way.

Bear market, or markets, in a correction can have huge snap back rallies. Dow up 200-300 points in a day is normal. Be careful in these tough times. I do expect much lower readings in the weeks and months to come overall. Be smart, and be patient, as much as humanly possible, but as I always like to say, do what feels right to you.

Have a nice weekend!

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