Stock Market What's Next....?

Stock-Markets / Stock Markets 2013 Aug 28, 2013 - 07:02 PM GMT

That's a great question. If you study the sixty-minute short-term charts, they're a bit more bullish. As things tried to sell today the MACD's refused to turn down. Yes, I am clearly a MACD guy. Always have been. It's in my blood. Even though 1639 should be very tough resistance, it seems to me that short-term charts may allow a bit higher first. No guarantee whatsoever as 1639 can just knock the market right back down. In addition, any move back down will get things oversold again on those short-term charts. Makes things very tough for both sides.

Sometimes the sixty-minute charts lie as well. They can say one thing but do another if the trend is strong enough. In other words, things are not easy here. The market topped out at 1710. It got to 1729. Eight points or 5%. Lower is likely in time but for the very short-term it's very hard to know if we'll meander around a while longer. Breach above then come back down. You know the drill. Oscillators are pretty compressed on those short-term charts while the Dow daily chart is also fairly compressed. It makes things very tough and we all know that's the way the big boys and girls like it. Emotional would be the word. All of this said, anything goes for the very short-term but 1652 or gap resistance, will be very tough for the bulls to get through.

That gap down from yesterday you would think would be defended hard by the bears. Again, that's if we even get that high. The bottom line is that the market is extremely difficult here. A little too compressed to possibly get things rocking lower but there's technical damage that probably won't allow too much upside action. Can you say whipsaw? I can. Annoying. It says loads of cash is clearly best. Do what feels right to you of course but cash is a real position in the stock market. Too many think that's not the truth. It is!

Let's talk sentiment. I have been under the assumption that a few weeks of a bad market would eradicate the bad reading we saw at 33.2%. Remember that some prior to that reading we saw a number at 36.4%. Two readings over 30% can cause nasty pullbacks in the market. However, a month of lateral to down has healed the problem. We are now at 14.3%. An amazing reduction in the spread. That level can often be very close to a market bottom when the market itself is in a bull market. If we're in a bear market, you often need readings in the single digits to at times, we'll below zero.

I believe very much that we're in a bull market, thus, it would be no shock that the market finds a meaningful bottom within the next few weeks. If the market continues to struggle this week, a reading below 10% could be upon us when we get our new number next Wednesday. Bulls are actually down to 38%. This is a very low reading and tells me that getting bearish on this market would not be wise bigger picture. Can we still see 1500's on the S&P 500? You bet we can but the tighter the spread the less likely it is that we'll get totally crushed. All I say is it never makes too much sense to get bearish with this type of reading if we're in a bull market. Adjust your thinking accordingly.

1639 remains resistance. 1606 below that and then 1592. Above 1639 there is 1652. That 1652 gap should be very difficult resistance for sure. The market is whipsawing about. It is very emotional when it does that as we all know. It tells me that cash is a smart way to go. If you need to play, keep stops tight. Take gains fast if you get them. Know those important levels such as 1639 and 1652, or 1606 and 1592. Aggressive playing in this environment makes little sense. Play the game appropriately so you can survive for when the time is right to get very aggressive.

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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