Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market 2014 Review ...Froth The Real Story

Stock-Markets / Stock Markets 2014 Jan 01, 2015 - 12:13 PM GMT

By: Jack_Steiman

Stock-Markets

There is only one real story for 2014. FROTH! Unprecedented levels in terms of time. Since February we have been on a sell-signal with regard to the bull-bear spread. Low rates and liquidity from the Fed here and abroad have allowed that signal to be ignored for the most part other that two quick pullback's of 5.1% and 9.9%. They were painful but healed up quite rapidly. There were decent gains for the year across the board with the Nasdaq 100 leading early, the S&P 500 and Dow catching up as the year moved on, but the small- and mid-cap stocks were the big gainers late in the year. Froth prevailing in those areas, even with the high levels of bulls to bears. Froth is greatest in those small-cap risky companies, but that didn't stop the bulls from running there late in the year.


The bull-bear spread not only held above 30% all year for the most part, it held above 40% for many weeks including last week when we closed at a ridiculous 41.5%. We tested down towards 30%, but now we're back over 40% and that's just not a good thing for the big picture. When markets snap from 40%, they fall hard and fast as we saw during the 9.9% correction which occurred after a few readings above 40%. So we started with some froth. It got worse as the year moved on, and after dropping back a bit, but still frothy, we're at it again. Off the charts bullishness, which will have to be corrected at some point soon. No way to know when but corrected nonetheless. Will 2015 be the year of payback, we don't know. Impossible to tell since technically we still have nothing to suggest it's upon us. But beware, it can get ugly fast when it does kick in.

This evening you can see our monthly charts. You can see that technically there are no topping sticks. Monthly charts have been known to flash sell signals through engulfing sticks to the prior month. Sometimes it's with very long tails of the top after testing key resistance but none of these things exist in the moment so based on the monthly charts alone, there are no real topping sticks to say a strong drop is imminent. It may happen but it's not showing its hand in the moment. It can happen just from the weight of froth and all the bulls being in but you look at the end of the month for some guidance from those key index charts and on some leading stocks in different sectors. The indexes being the most important and for now we're just not seeing it. Nothing that says run for the hills if you're long. The risk is there for sure without the warning candle sticks, but nothing in terms of true technical's that say I'm out of here.

What is the classic warning sign that a bear is about to take over? Distribution of stocks on high volume off tops. You then spend months, up to six months, putting in the top. You get the usual retail investor buying up on low volume and every time it gets back to or near the highs, big money sells it off again on high volume. It can take as many as three to four journeys up and down before a true top is set. Eventually the bulls in the world of retail give up and down we go but it's very unusual to have a market just collapse in to a bear without this process taking place. It's annoying in that it takes so long to put in a final top.

It's no different than what we saw in SPDR Gold Shares (GLD) in 2011. One heavy volume pullback off the top after another. It seemingly took forever but ultimately the top was in and now it's down about 40% off those highs. Also, when oscillators lag the drop in price meaning when price leads over the oscillators that too is a bearish sign and you'll see that quite often during distribution. For now, we don't have to worry about that but we'll keep a keen eye on the possibility since froth is so out of control and more importantly, for so long a period of time. There will be payback. No one and I mean no one knows exactly when.

With all the froth we've been dealing with, it's hard to imagine 2015 won't be far more difficult than 2014. Larger selling periods. Deeper selling episodes are all likely but nothing is a guarantee. Play with your vision not your mind. Play simply what you see. I'll be here to help guide you through the nonsense and the game we call the market. 2015 begins with the highest level of risk seen in over a decade. In many ways, more than we saw in 1999-2000. We can keep going higher for a while, but recognize the risk reward for what it is and do what feels right to you and no one else.

Happy New Year!

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 15-Day Trial to SwingTradeOnline.com!

© 2014 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.


© 2005-2022 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