Stock Market Unwinding... Rallying Back.... Waiting On The Right News

Stock-Markets / Stock Markets 2016 Jul 07, 2016 - 12:31 PM GMT

The market spent a day and a half trying to fall enough to unwind those overbought, sixty-minute index charts. The Dow, S&P 500, and Nasdaq are very overbought with RSI's intraday hitting the low 80's. Finally, we saw some selling, which allowed all of those index short-term charts to unwind their RSI's back in to the mid 40's. That was enough to start the move back up, but not enough to get the market exploding. Unwinding was clearly necessary. It's also healthier if you don't stay too overbought for too long. Get things unwound, which will allow for a better floor from which to move higher. Also, if you don't get too overbought it helps prevent negative divergences down the road.

Not that they matter these days, anyway, but I'm old school and prefer no negative divergences in my line of vision. Today was a good day, but it was also a normal day in the market process that has been about back and forth action, but with a lot of bad news it's not getting sold overall. If the market gets the right news it could finally break out, but that's for another day. Today, unto itself was a solid day in the continuing bull market that's a grind for sure, but without doubt still in a good way for the bulls. Nothing is easy, but still bullish. A grind can feel bearish, but the action remains unquestionably bullish in nature.

So the market has had everything thrown at it from Brexit, and the collapse of European banks, to a nasty fall in our own banking stocks. It has dealt with a terrible string of bad earnings reports with the season getting ready to be thrown at us starting next week. The earnings better start improving fast, but, hey, it hasn't bothered the market to this point, so maybe bad earnings will continue to be brushed off. Earnings, Brexit, and declining economies, are nothing to worry about, right! So what will need to happen to finally break us out. The bad news seems to be holding us from that breakout. We don't fall, but we grind. What can be the catalyst is my thought.

The answer could be that all important Jobs Report, which was horrid last month. Maybe a nice massaged number that's good could get this market to finally say goodbye to 2134. No guarantee, but since bad news isn't bothering this market, I would have to think a nice upside surprise in the jobs world could be the magic potion. If the jobs fail badly, we probably just hang around and wait that much longer for something good to occur out of the blue. I wouldn't worry about a market collapse if the jobs are bad, but it could make for some frustration for traders as we continue to go nowhere overall. Bullish, but nowhere is still no fun. If you're a bull, here's to hoping you get your jobs surprise.

The market has been as tough as it comes because of the new way it's playing itself out. Never have we seen this type of disconnect, and it shows no sign of slowing down. In fact, it may get a lot worse. A breakout will make it beyond ridiculous. The reason the market doesn't sell overall has been, is, and will be the low-rate environment. That won't be changing for maybe years to come, so if the bears are to get some satisfaction they will have to hope the big money finally decides to sell due to froth beyond anything we've ever seen. That they say valuations are just too ridiculous. Time will tell, but for now, a bias to the upside should be the way you look at things. It's all insanity in my eyes, but we shall take it day to day.

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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