Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21
S&P 500 Rallies To New All-Time Highs – Are The Markets About To Break Higher? - 5th Sep 21
Bond Conundrum - Boom or Bust for Gold? - 5th Sep 21
How the sale of a Sting CD sparked an Entire Online Industry - 5th Sep 21
Three Years of Fresh Thinking With Scott Dylan and Dave Antrobus - 5th Sep 21
Bitcoin Bear Market Trend Forecast 2021 and Model Crypto Portfolio Buying Levels - 4th Sep 21
The Most Actively Traded Companies on the Toronto Stock Exchange - 4th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Grinding Action at Overbought.....

Stock-Markets / Stock Markets 2010 Mar 08, 2010 - 06:35 PM GMT

By: Jack_Steiman


Which is exactly what we're doing right here. With S&P 500 resistance at 1151 and with many index charts at 70 RSI's, it's not easy here for major upside until we get some unwinding of those daily charts to where the RSI's are at least in the lower 60's, if not somewhere in the 50's. It's not just that we're overbought, but again, when you add in major resistance 1% away, it makes the journey that much more difficult for sustained upside in the short-term.

This doesn't mean we won't stay overbought a bit longer and trend up to or slightly above 1151 first but don't expect the big blast from this point until we can unwind things to where new bull legs can get going. I do believe that leg is in our future but just not from this point. Lots to look forward to if you're a bull but not yet.

I get asked about shorting a market when you know it's getting to a point where pullback's naturally take place and I say not a chance. You never short a market in a clearly defined up trend because you can stay overbought a lot longer than most think possible, yours truly included. While it's not appropriate to fire out 10 new long plays because of the overbought conditions we're in at the moment, firing out shorts is the last thing I'd do knowing the trend is undeniably higher for at least the short-term, which is all I'm interested in for the moment. If you do decide to short, be very nimble with very tight stops. The worst thing any trader can do overall is to be impatient and play for the sake of playing because you're bored. So maybe it's not time for a loot of new longs so let me short. No way is that the correct thing to be doing. Be patient and let things set up as they will for sure.

1115 is now massive support on any move lower on the S&P 500. Traders know this and on any selling down, new buyers will want to come in and defend this level in a big way. The bulls took a long time to capture this level and barring the unforeseen, they will defend this level as it gets approached. I don't think we'll get all the way down there but it's good to understand where the bulls will come in hard if things start to sell off a bit harder than many think possible. Lots of computer generated orders sitting there and waiting if the market gets that low. When trends are higher, those who have missed the ride get anxious and want to participate and that alone can help keep things above critical support. Also, the bears know what levels the bulls will defend and if the trend is higher and the market has trouble falling, they'll stop shorting and in fact, will cover their shorts giving the market upside fuel.

No matter where you look after today's action, you will see 60-minute charts on both individual stock charts and index charts at extreme levels of overbought, confirming the overbought that exists on the daily charts. There are RSI's well in to the 70's and even the upper 80's. This is simply unsustainable. It doesn't mean slaughter and it may get worked off mostly with a move laterally although a bit lower, of course. Just because we're very overbought on all time frames doesn't mean death. In fact, quite the opposite. Markets don't get this overbought unless it's extremely healthy. Weak markets sell the moment any time frame chart gets to 70 RSI. Healthy markets stay overbought and can get to levels of extremes such as we have now so although this means some boredom likely short-term, it bodes very well for the weeks, if not many months to come. Hang in there as things get worked off in the days ahead, even if we grind to 1151 first, although that's no guarantee. Patience will pay off big time.



Jack Steiman is author of ( ). Former columnist for, 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 21-Day Trial to!

© 2010

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.

© 2005-2019 - 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