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Stock Market Down Hard Then Reversal.....

Stock-Markets / Stock Markets 2014 Jul 29, 2014 - 11:06 AM GMT

By: Jack_Steiman

Stock-Markets

No one reading this article will argue that things are deteriorating technically. We also have fundamental headaches, such as we saw from the real-estate world today. But focusing on technical action, the bears certainly have made some progress. A nice gap down now in the way of the bulls making their task of sustainable upside far more difficult. That said, we started up a hair this morning, only to see the futures fall apart just after the open. A real swoon lower with the S&P 500 falling well over ten points quite rapidly. It looked bad as the 20-day exponential moving average was getting taken out with relative ease.


However, shortly thereafter, the sixty-minute index charts got oversold with readings of 30 RSI, or lower, and back up we went. The indexes mixed with the Nasdaq down a hair, while the Dow and S&P 500 were up a hair. The bears let it get away from them as the rally allowed the indexes to all finish back above their 20-day exponential moving averages. The S&P 500 losing the 20's would be huge for the bears, but once again a tail and tails mean it won't be easy for those bears. Nothing will be easy for either side, but at least the bulls can feel better about rallying back above those earlier in the day lost 20's. A nothing day when all was said and done.

So when is bad news good news? Once again, the rally seemed to coincide with bad news from the economic world. Housing permits dived lower. The stocks in that area were very hard hit to the down side. That said, bad economic news equates to good news for rates staying on the very low side. Fed Yellen is not anxious to raise rates as long the housing market and the economy overall are struggling. The forced bull is with us and not showing too much in terms of going away.

The GDP reports are poor. Housing is poor overall, with small pockets of good news but again, overall not very good. The Fed is going to need to see consistent good news from the housing market before she's overly anxious to start her rate raising cycle. Trying to understand when she'll raise is silly. She'll do it aggressively when the economy can stand tall without her help with low rates. Still bad overall economic news leading the lower rate cycle.

Bottom line, it's all about losing the 20, and then the 50-day exponential moving averages on all the major index daily charts. Until that moment occurs, meaning losing the 20's you shouldn't even think about shorting for the most part if at all. Do what feels right to you, of course. And once we lose the 20's, things don't truly turn bearish until we lose the 50's. The numbers are as follows.

On the S&P 500 the 20's are at 1972 while the 50's are at 1949. Have to lose 1949 with force and volume to get legitimately bearish. On the Nasdaq the 20's and 50's are at 4422 and 4353 respectively. When 4353 is in the rear view mirror the bears can celebrate. Losing it on big volume would be more confirming. You can play long, but safest is playing lower beta, lower froth stocks. You know the drill. Froth is the big headache that can take this market down without provocation. Day to day for now folks. Aren't we all.

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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