Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22
What it's like at a Stocks Bear Market Bottom - 29th July 22
How to lock in a Guaranteed 9.6% return from Uncle Sam With I Bonds - 29th July 22
All You Need to Know About the Increase in Building Insurance Premiums for Flats - 29th July 22
The Challenges on the Horizon for UK Landlords - 29th July 22
The Psychology of Investing in a Stocks Bear Market - 26th July 22
Claiming and Calculating The Research and Development Tax Credit - 26th July 22
Stock Market Bearish Test - 26th July 22
Social Media Tips and Writing an Effective Call to Action - 26th July 22
Has Rishi Sunak Succeeded in Buying His Way Into No 10 - Fake Tory Leadership Contest - 26th July 22
The Psychology of Investing in a Stocks Bear Market - 26th July 22
Claiming and Calculating The Research and Development Tax Credit - 26th July 22
Stock Market Bearish Test - 26th July 22
Social Media Tips and Writing an Effective Call to Action - 26th July 22
Has Rishi Sunak Succeeded in Buying His Way Into No 10 - Fake Tory Leadership Contest - 26th July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Markets Look Range Bound For Now

Stock-Markets / Stock Index Trading Nov 13, 2009 - 01:50 AM GMT

By: Jack_Steiman

Stock-Markets

The market got to the top of the wedge and decided it was time again for another pull back in the pattern. We did have a doji yesterday and that can cause some near term down side off the up trend in place. Action which allows the market to unwind from overbought on those 60-minute time frame charts. We started the selling off that doji today that took nearly 1% off the averages. Obviously, nothing from nothing, but it was a fairly good down day with the majority of stocks leading lower. That's good as it allows the leaders a breather.


The market gapped lower, filled the gap, but then spent the rest of the day gradually moving lower to close just a few points off the lows. No technical damage of any kind took place on the selling with the up trend, for now, still firmly in place. Stochastics on the 60-minute time frame charts went from nearly 100 two days ago to roughly10 today. RSI's were up at 81 and now they're roughly 52. Pretty solid unwinding for sure without a ridiculous amount of price damage, although, we can certainly see more down side in the days ahead. In the end, the bears got some much needed selling under their belts while the bulls can feel good about the unwinding that took place while still holding well above critical support.

There is important support on the S&P 500 at gap, which is at 1070. Below that we have the big line in the sand or the 50-day exponential moving average currently at 1055. The 50's are at 2092 on the Nasdaq and 9794 on the Dow. These are clearly what the bears want to target and remove from the rear view mirror. That job will NOT be easy. There are gaps above these final lines in the sand support numbers and they add a lot of protection to the bullish case. With the charts unwinding rather quickly the bears have their work cut out for them on this overbought pullback. Longer term these are truly the only numbers that matter. Remember, too, that these levels are changing daily, but only by a very small amount. I will always update those levels, especially if start getting closer to them.

Sentiment seems to sway towards being bearish here. We hear constantly how this market can't justify current levels. In the real world this may true. The stock market is not the real world. Emotion is the only real world when it comes to this nutty game. We have too many bears out there based on all reliable surveys for there to be any persistent selling pressure. Sure we can pull back 5% or so, but that's likely it, if that. A day like today brings about so much negativity it just blows me away. With the markets range bound, we may see overall downward pressure over the next week or so, and I can only imagine what that'll do the emotions running wild out there. Try to keep your emotions in check. Understand what separates a bear market from a market pulling back. It's those critical 50-day exponential moving averages.

You may all believe with every fiber of you being that they will get taken out and shot. That may end up being true, but before you go getting all bearish and shorting your little hearts out, see the event take place and then you can respond. You won't miss much. If the bears are right, once the 50's do go, you'll have plenty of time to make good on the short side. I would suggest losing them is more unlikely than you think for the next many months, but if you think I'm wrong, at least see the evidence before acting too aggressively on the dark side. Folks have been doing that for months and I can tell you they all regret it today.

What seems to be unfolding here is a continuation of a large wedge in place for many months off the March lows. Consolidations can take a very long time due to the move that preceded it. It was quite large in scope and thus the market is still catching its breath. The market has set a range from roughly 1101 to 1029. One could say 1105 to 1020, but you get the idea. That's nearly 8%, and 8% can really mess up ones head if you are too aggressive. In markets such as these, in order to maintain calm, you get involved with small moves. A few plays maximum at any one time is the way to go about things. This way, if you’re down a bit on them you can wait patiently for them to recover.

As long as the 50-day exponential moving averages hold they most assuredly will. I stick with longs when a market is in an up trend confirmed. You can dabble from time to time with shorts, but know you're playing against the primary trend. Bottom line, slow and easy for now. In time the market will make a large move out of this wedge. It's unclear which way that'll go, but I still favor up side. Always ready to adjust if need be.

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 30-Day Trial to SwingTradeOnline.com!

© 2009 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.

Jack Steiman Archive

© 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