Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Learn to Spot Reliable Trading Setups: ANY Market, Any Market Time Frame - 21st Oct 19
How To Secure A Debt Consolidation Loan Even If You Have A Bad Credit Rating - 21st Oct 19
Kids Teepee Tent Fun from Amazon by Lavievert Review - 15% Discount! - 21st Oct 19
Stock Market Stalls: Caution Ahead - 21st Oct 19
Stock Market Crash Setup? - 21st Oct 19
More Stock Market Congestion (Distribution) - 21st Oct 19
Revisiting “Black Monday Stock Market Crash October 19 1987 - 21st Oct 19
Land Rover Discovery Sports Out of Warranty Top Money Saving Tips - 21st Oct 19
Investing lessons from the 1987 Stock Market Crash From Who Beat it - 20th Oct 19
Trade Wars: Facts And Fallacies - 20th Oct 19
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Stock Market 2014 Review ...Froth The Real Story

Stock-Markets / Stock Markets 2014 Jan 01, 2015 - 12:13 PM GMT

By: Jack_Steiman

Stock-Markets

There is only one real story for 2014. FROTH! Unprecedented levels in terms of time. Since February we have been on a sell-signal with regard to the bull-bear spread. Low rates and liquidity from the Fed here and abroad have allowed that signal to be ignored for the most part other that two quick pullback's of 5.1% and 9.9%. They were painful but healed up quite rapidly. There were decent gains for the year across the board with the Nasdaq 100 leading early, the S&P 500 and Dow catching up as the year moved on, but the small- and mid-cap stocks were the big gainers late in the year. Froth prevailing in those areas, even with the high levels of bulls to bears. Froth is greatest in those small-cap risky companies, but that didn't stop the bulls from running there late in the year.


The bull-bear spread not only held above 30% all year for the most part, it held above 40% for many weeks including last week when we closed at a ridiculous 41.5%. We tested down towards 30%, but now we're back over 40% and that's just not a good thing for the big picture. When markets snap from 40%, they fall hard and fast as we saw during the 9.9% correction which occurred after a few readings above 40%. So we started with some froth. It got worse as the year moved on, and after dropping back a bit, but still frothy, we're at it again. Off the charts bullishness, which will have to be corrected at some point soon. No way to know when but corrected nonetheless. Will 2015 be the year of payback, we don't know. Impossible to tell since technically we still have nothing to suggest it's upon us. But beware, it can get ugly fast when it does kick in.

This evening you can see our monthly charts. You can see that technically there are no topping sticks. Monthly charts have been known to flash sell signals through engulfing sticks to the prior month. Sometimes it's with very long tails of the top after testing key resistance but none of these things exist in the moment so based on the monthly charts alone, there are no real topping sticks to say a strong drop is imminent. It may happen but it's not showing its hand in the moment. It can happen just from the weight of froth and all the bulls being in but you look at the end of the month for some guidance from those key index charts and on some leading stocks in different sectors. The indexes being the most important and for now we're just not seeing it. Nothing that says run for the hills if you're long. The risk is there for sure without the warning candle sticks, but nothing in terms of true technical's that say I'm out of here.

What is the classic warning sign that a bear is about to take over? Distribution of stocks on high volume off tops. You then spend months, up to six months, putting in the top. You get the usual retail investor buying up on low volume and every time it gets back to or near the highs, big money sells it off again on high volume. It can take as many as three to four journeys up and down before a true top is set. Eventually the bulls in the world of retail give up and down we go but it's very unusual to have a market just collapse in to a bear without this process taking place. It's annoying in that it takes so long to put in a final top.

It's no different than what we saw in SPDR Gold Shares (GLD) in 2011. One heavy volume pullback off the top after another. It seemingly took forever but ultimately the top was in and now it's down about 40% off those highs. Also, when oscillators lag the drop in price meaning when price leads over the oscillators that too is a bearish sign and you'll see that quite often during distribution. For now, we don't have to worry about that but we'll keep a keen eye on the possibility since froth is so out of control and more importantly, for so long a period of time. There will be payback. No one and I mean no one knows exactly when.

With all the froth we've been dealing with, it's hard to imagine 2015 won't be far more difficult than 2014. Larger selling periods. Deeper selling episodes are all likely but nothing is a guarantee. Play with your vision not your mind. Play simply what you see. I'll be here to help guide you through the nonsense and the game we call the market. 2015 begins with the highest level of risk seen in over a decade. In many ways, more than we saw in 1999-2000. We can keep going higher for a while, but recognize the risk reward for what it is and do what feels right to you and no one else.

Happy New Year!

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