Stock Market Oversold Bounce...Big Picture Still Nowhere...

Stock-Markets / Stock Markets 2015 Jun 11, 2015 - 10:05 AM GMT

Yes, today was great for the market. A nice healthy move higher after we double tapped at oversold on the short-term, sixty-minute index charts. A rally was due, and we certainly got one today, but you have to ask yourself if the bounce is truly relevant or not. It may be over time, but, for now, all it did was put us back a little over the middle of the range that we've traded in most recently, which has been 2070 and 2134, although big-picture the level is 2040 to 2134. So we're mostly in the middle now of the most recent range. We saved ourselves from dropping down and testing the dreaded 2040 level, which the bulls want no part of having to deal with. A loss of 2040 would be bearish, so now they can relax a bit, but still there is nothing to celebrate other than the save.

Today is not bullish nor bearish. None of the action we've seen over the past five plus months is anything worth talking about. Just meandering about to nowhere with emotions getting thrown all over the place. Over time, if we do get one more pullback, we should see strong, positive divergences form on the key sixty-minute index charts which would set things up quite nicely for the bulls. The daily charts clearly unwound enough to allow a breakout over 2134 in time if we do indeed get those positive divergences on the next move lower. So celebrate if you're bullish today but don't overdo it as we're still not in the best place technically.

We started with the gap up this morning and after a few attempts by the bear to bring it down, the bulls took full control and enjoyed the type of candle stick that gives the market hope down the road but clearly offers up no guarantees. The candles large enough to take out a few of the most recent selling days. Most importantly, we saw the oscillators on all the critical time frames impulse upward, which verified the price action. Having weak oscillators with strong price action is a major league red flag but that was not the case at all today. Very confirming meaning any move down from here will set things up nicely. One thing that often gets over looked is how oscillators move with price since folks are always so focused ONLY on price movement. The oscillators tell us a lot about the potential for future confirmation.

Whether a given day has hope for further similar action in the days and weeks ahead. Today has to leave the bulls feeling pretty good but that does not mean some tough days can still occur without warning. If we do get one more selling episode with a little force behind it, the daily charts are basically very unwound and thus could make the breakout move due to having loots of room on those key oscillators. You prefer to have things unwound so we're not dealing with having to get very overbought to complete a breakout move. That will not be the case here if the market decides it's time to get up and go. Interesting times the way things are setting up here but there are absolutely no guarantees of anything in this environment.

The weakest sectors are remaining so. Banks the best for now. Rails the worst along with the transports in general, although there's hope there. Try to avoid playing the worst sectors in the hope of catching the big bounce. They're just not cooperating. Why bother with the weak in the hope of something changing when you can go the areas of the market that are showing true strength. 2040 is massive support. 2134 is massive resistance. We're in between and could stay that way for longer than any of us would like. It's already testing us emotionally, so if you play, stay with strength and avoid the bear market areas of the market. Do what feels best to you, of course, but that's how I would approach things. Don't get over extended, but keep some scratch in the game.

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.

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