Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Selling Accelerates...

Stock-Markets / Stock Index Trading Jan 22, 2010 - 02:37 AM GMT

By: Jack_Steiman

Stock-Markets

When sentiment needs correcting, the only way to really do it is to shake the tree. If you get small drips and drabs it is quite unlikely that you'll get scared out of the market. You'll look at every small down move as a buying opportunity. The only way to change that thinking is to make things look bad. Really bad. Scare you bad. To make you think twice about buying those dips and to get to the point where you won't buy the dips. Where your reaction to downside will be I am not touching that. It has to go much lower from here.


When this entire process has taken place and moves the average trader to say I've had enough, only then can we talk about getting to where we need to be. Up until last week, all we had was a fearless trader. A bull bear spread of 37.5% spread at the top. Now down to 33.5% heading in to this week. You can bet the tide is turning there.

The only problem with sentiment is that it's NOT an exact timing mechanism. You have to stay with the trend in place until the turn occurs. Remember, we had some strong plays in to that heavy bullish sentiment. We had four consecutive weeks of a 30+% spread yet it took until we got to 37.5% before the downside action ensued. Sentiment at extremes will turn the tide for sure but it's untimely as an exact way to play. If you had other circumstances involved it becomes a little more precise but we didn't have enough thus you stay long until you get the turn but you tone the number of long plays down. We did that.

We started the day out with a split market as the Nasdaq was up based on strong earnings reports from F5 Networks (FFIV) and Ebay (EBAY) to name a few good reports from last night. It breached the gap down from yesterday at 2304 by a few points and then turned lower. The S&P 500 and especially the Dow were already struggling once the market opened. After roughly 40 minutes of action the market turned down hard. A real blast lower aided by the President of the United States putting major restrictions on trading by the large financial firms. Stocks like Goldman Sachs (GS) were down 2 at the time of the announcement but within minutes it was down 11 before closing off those lows. The market plunged further due to this announcement by our President. We closed near the lows and very oversold on the short term-time frame charts. Oversold can stay that way but the selling was hard enough all day, a trend down day, to allow the very short-term to get oversold. Nasty action that probably made most if not just about all of you question the up trend that was just in place a week ago. The job is getting done.

It always seems to come back to those financial, doesn't it. The problem child is having fits again. The President told the financials that they can no longer go to the candy store alone. That a parent needed to be with them at ALL times to make sure their behavior will be appropriate for after all, when left alone in the past, they proved they couldn't be trusted and everyone is sick of that. Restrictions mean lower profits, which, of course, those large cap banks in time will make up for by charging all of us higher fees. Count on it. For the moment they are going to have a hard time based on these restrictions that will likely be voted in to place to appease Main Street folks who are really sick of Wall Street. Who can blame them really. The financials started this mess because of a lack of risk appropriateness and now their hands are tied and longer-term that's good news for everyone, except for those banks, of course, because they'll scream it's unfair. Too bad guys!! Keep crying!!

So where are those oscillators. Let's go over everything once again step by step. Where it began at the top. Where it was yesterday and where we are after today's action. The Dow started out at stochastics 100 and RSI at 65. Yesterday it went to 73/54. Today it's at 53/42. Not enough folks. Just not enough. Doesn't mean we don't have up days here and there but we need to see sub 20 stochastics and sub 30 RSO. The S&P 500 started out at 100/68. It went to 74/55 yesterday and closed today at 56/45. The Nasdaq has seen its journey begin at 100/70. It went to 54/54 yesterday and closed today at 45/49. Nothing has gotten to where it needs to. A start for sure but not oversold folks. More selling will be needed. We'll probably need to break the 50-day exponential moving averages on many of the major indexes to get things where we need to and if we do, that'll only get the masses more pessimistic.

Now, with everything I have written, is it possible I'm getting this totally wrong? Yes! We may have seen a long-term top based on sentiment. I'm not seeing it that way at this moment in time, but I will be very careful not to put out plays if things do not set up. I'm not locked in to any type of permanent minded thinking. I will adjust to whatever sets up. I am only giving you my analysis based on what I'm seeing. There are no guarantee's about anything. I think once we sell off hard enough and start ultimately putting in positive divergences on the daily charts or at least the 60-minute charts, we will set the bottom and start heading up once again. I will guide along as we go and I will be ultra careful not to put out longs if it's not right to do so just because I have a belief system to what's setting up here.

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!

© 2010 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