Stock Market Has NO Bid At 1080 S&P 500...

Stock-Markets / Stock Markets 2010 Aug 14, 2010 - 05:58 AM GMT

This is shocking if you think about it. Straight down 50 points. Right at critical support after four straight gap downs, and at oversold on the 60-minute charts. It still is having trouble catching a bid where it needs to hold. I still think there's a decent chance we get a small bounce up early next week, but it looks as if the market wants lower sooner than later. It is very unusual to see four straight gaps lower.

Only the last one has filled, and barely at that if you look at the action on the Nasdaq today. Normally this would provide a strong bounce from an exhaustive perspective. Only in the very weakest of markets will you find it not bidding up decently after this event has taken place. This seems to be the message the market is signaling for now. With 1080 such important support, and with no bid currently, it seems as if the bulls may be getting ready for another long squeeze lower.

Again, I do expect a small move higher early in the week, but there's no guarantee of that happening. 1090 to 1100 S&P 500 will be the wall of China on any attempt higher. Those are gap downs to the 20- and 50-day exponential moving averages. The market should not get through that confluence of strong resistance. If 1080 goes, the next stop is the 1050 level where we see the 2009 up trend line off the lows along with the neck line on the head-and-shoulders pattern. We should finally get some relief there for a better bounce, but for now, the bears will work on eroding through 1080 and then bring it to 1050. When you sum today's overall action you come away with a very sick market that is begging for lower after a small possible bounce early next week. The bears are in control for now.

When you look over an entire market you search high and low for what are the culprits to a given situation. No doubt the blame can be seen everywhere. However, upon deeper inspection, we can clearly see that the financials and the semiconductors are the absolute worst performers of all. They are a constant drag on this market, but now we're also seeing consistent under performance in the Nasdaq as leading technology stocks are starting to crack while others have already cracked from about a week ago.

Stocks such as Cree Inc. (CREE) and Apple Inc. (AAPL) started breaking awhile back and now we're seeing stocks such as F5 Networks, Inc. (FFIV), the very best of the best, starting to show some cracks in its previously impenetrable wall. Nothing is safe right here and that's a sign that things should deteriorate further before anything sustainable to the upside takes place. There really seems to be no safe haven as we look all around this market. Nowhere for money to rotate to as a safe haven. The Nasdaq and small caps are now leading down with the S&P 500 and the Dow also performing poorly. Nowhere to run, nowhere to hide.

You have to also turn your attention to someone like John Chambers, the CEO of Cisco Systems, Inc. (CSCO). He is extremely well respected on The Street for his brutal honesty. Statements such as uncertainty, when it comes from his lips, is taken seriously. When Intel Corporation (INTC) doesn't defend channel checks that say their business has hit a wall in the past few weeks, that should be taken seriously. We are seeing, for the first time in a very long time, the biggest revenue companies in the world saying, or suggesting, that things have suddenly deteriorated. This seemed to have begun in May or June. It seems to also be accelerating. So, if nothing else, sometimes taking a simple look at the old time stocks such as Cisco and Intel can bring more insight than one would expect these days.

1131 S&P 500 is still the breakout level with 1080 big time support, and 1050 being the ultimate line in the sand for the bullish case. Below 1050 we lose the head-and-shoulders neck line and the long-term up trend line off the 2009 lows, as I mentioned earlier in this report. The market could potentially free fall with a strong close below 1050. Losing 1080 would likely take us to 1050 before we see a reasonable rebound to back test the 1080 level. Again, I do think we bounce early next week, but that is unclear. Oversold 60-minute charts abound, but maybe they won't matter now. They may just stay very oversold, however, taking on too many shorts with RSI's at 30 doesn't make too much sense. We're good as we are for now, and would look to take on shorts, or inverse longs that play the same as shorts, if we can get a bounce back to the 1090 area on the S&P 500.

Please be very careful with longs right 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.

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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