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Stock-Markets / Stock Index Trading Nov 02, 2009 - 07:41 PM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleThe bears are trying. I'll give them that. After all, they've taken out the 50-day exponential moving average on the Nasdaq and have kept it below for a few days now. The S&P 500 is playing leap from the 50-day exponential moving average.


Above. No below. No above. No, on it. Ridiculous really.

The Dow refusing to break but clearly the least important of the major indexes as it's only 30 stocks. However, it is important to some degree and they just can't take it below the critical 50-day. So yes, the bears are trying, but overall, still failing to break this market in a fashion that suggests something much worse is on the horizon. I would be convinced of that if they could break all of the 50-day exponential moving averages and then run with it. In other words, break the 50's and then slaughter the bulls. Not happening right now. No evidence that it will. The bulls simply come in where it counts and hold the line. Sure, it breaches. Breaches are irrelevant. They need breach and run and run some more. They are failing at that. They have done a good job with Nasdaq as many of the old favorites are now behaving poorly, but just when they do that, the secondary stocks are kicking in and holding the fort. They just can't win. They have some time here before things get away from them but they'll need to act soon or get gobbled back up by the bulls.

Today was a wild day. The futures were up pre-market from the oversold short-term time frame charts I spoke about. When RSI's average a tad below 30, and stochastics at or below 10, you can expect some attempt, at the very least, by the bulls. We started up and drifted until 30-minutes in when good economic news hit. The market blasted higher, the Dow up over 140 points. The Nasdaq, which was under performing, also started to bid, although not as intensely as the Dow or S&P 500. The market then suddenly turned down as is often the case when a market is in more of a down trend. You find willing sellers when you back test support now turned resistance.

The S&P 500 hit 1047 a few times, even clearing it, but couldn't hold on. Willing sellers at the 50's is now the normal but who knows how long that will last in this nonsensical whipsaw. For today, we saw the market all over the place, but when all was said and done, not much changed. The Dow is still above the 50-day exponential moving average. The Nasdaq is below, while the S&P 500 is hanging right near it, five points below. Not nearly enough to say it has cleanly lost that critical area of support.

The daily charts remain oversold as do the short-term charts. (See charts: COMPQ, SPX Daily Charts, QQQ PowerShares (QQQQ), and the INDU) When MACD's get compressed such as they are on the short-term charts and those compressed MACD's are confirmed by oversold oscillators on the daily charts, it is very hard to get sustained down side action. Again, the same reminder, markets go up far more than they go down, and when you get the daily and short-term charts at oversold, you are not likely to get too much more selling unless the market is about to get slaughtered, and that's just not in the cards. Can the S&P 500 fall another 2% to 1020 massive support. Sure. Much beyond that I don't see it near term. If we get down there, we will have massively compressed charts everywhere that would snap soon thereafter. As far as longs go, many more stock charts are starting to break down and any move up will have big gaps to deal with and that makes sustainable upside extremely difficult. Can you say cash? Sorry folks, but that's the way it is. It'll change but it is the right way to play in my mind.

Massive support is at 2040 Nasdaq, breached a few times today but held at the close. 1020 is the number on the S&P 500. These levels are the recent lows from roughly a month ago. For the Dow, the number at support is its 50-day exponential moving average still not even breached, currently at 9684. Resistance is key at 1060 S&P 500, then 1074 and finally 1101. This is a very important time for the market, as most times seem to be, in that the S&P 500 is playing with losing its 50-day exponential moving average and with financials being so prevalent in this index, it would not be good if we lost those stocks as they lead the economy and the stock market. They were the culprits of this mess thus they need to act well, showing that things are improving, before we can feel better about this market. If they hold up well then the S&P 500 should have little trouble gaining back lost support now resistance at 1047. It really is about 1020 and 1047 now.

A tough market to play folks. Although things have deteriorated some, and yes, things don't look great, the bears are losing momentum down here at the 50-day exponential moving averages on the S&P 500 and Dow. It makes the risk reward weak for both sides. We want something that tells us the risk reward is powerful in one direction. That most definitely does not exist today. We have Federal Reserve Board Chairman Bernanke's ruling on interest rates and his thoughts on the state of the economy this week, and the powerful Friday’s Jobs Report. It may be another week of meandering until these events become facts to the rest of the world. The market is anxious to know about the Fed’s thoughts on future interest rates. This will affect the dollar, of course, which affects the markets. It wants to know if job losses are indeed worsening. A very interesting week is dead ahead. Don't overplay this mess. Cash or almost all cash is the way.

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.

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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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