Rough Week For Stock Bulls But No Thrust Down Yet....

Companies / Stock Markets 2015 Jan 17, 2015 - 06:35 PM GMT

It wasn't a good week for the bulls, but if we look back on this market as to whenever it corrects, it seems about 5% is mostly the normal drop. That's just what we got from the top many weeks back at the old highs on the S&P 500. Basically, it was a one hundred point move lower, or 5%. Let's face it, that's not even selling when you think of the risk this environment holds based on all the troubles it's facing from horrific monthly charts to froth, etc. We had a major breakdown through the diagonals on all the key-index daily charts, but there has been absolutely no real follow-through to this point.

When markets lose this type of pattern, it usually just free falls down over the days that follow. Thus far, nothing from nothing. It could just be a back test of 2020, or the loss of that diagonal, and then it'll plunge lower again or it could be the beginning of the next leg up even though that makes zero sense on so many levels. We can only get the answer to those things in time. It tells you that cash is still best since there's nothing out there that's saying we are about to go directional one way or the other. So when we sum up the week that just past, we can say the bears did indeed do some damage, but, thus far, it's muted with the bulls defending as needed for now. A very important week is ahead of us once the holiday is over on Monday. It's probably do or die week for both sides.

Why do or die? Because on Thursday we will find out just how much Mr. Draghi, in Europe, will be doing for the banks regarding the QE program he has promised to implement now that he has been granted a legal right to do so. Bears usually run from anything QE, so we'll just wait and see. It shouldn't be news any longer since he got the right to legally implement, thus, I'm not sure why the bears are pulling back some, but maybe they want to see the size and scope of his new program and possibly anything else he may be promising. The bears have been burned so badly through the years by QE programs, I guess i can understand it, but the excuses are running out for them.

They have massive froth, MACD's at super compressed levels on the monthly-index charts. They have more than they need to kill this market short-term, but still they have yet to follow through as one would expect based on those lost diagonals. Once Draghi is over the bears better get rocking or we'll see new highs. It doesn't make any sense at all, but you play what you see not what you think should be. The charts aren't looking good, and thus, they have yet more ammunition. Will they make the move? Will they choke as usual? Here's all you need to know. A close over 2035 is bullish big time, while a close below 1988 is bearish big time. Let that be your guide. Keep it simple.

Look folks, I wish this was easier, but protecting you is my job. I do the best I can. This market is as difficult as it gets. It is incredibly unclear and complicated with Draghi in the future, but froth and poor monthly charts from the past and present. It's never good to compare past markets that look the same technically, because often the fundamental conditions are quite different, thus, you shouldn't expect the market to behave as it did before. Rates are different than we saw in 2008 and 2000 when those diagonals broke down and followed through hard immediately. That's what most were expecting now, but it just didn't happen. Not yet anyway. Maybe it's just being delayed. We shall see. In the meantime my suggestion is to keep it very light either way you're playing. Cash, in my opinion, is a proper place to be.

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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