Stock Market Bulls Bears Status Quo...
Stock-Markets / Stock Markets 2012 Mar 18, 2012 - 05:50 AM GMTBy: Jack_Steiman
The way things are with the bulls right now makes it tough for the bears to deal with. But honestly folks, there isn't much to add to what's been going on for some time now. The market has two great things going for it, both powerful and potentially long lasting. One is potentially longer than the other, but both are in great shape at the moment.
First, we have a fed that refuses to do anything, or say anything, that will shake the market up. He's going to keep interest rates extremely low for years to come, and as long as that's the case, this market will have a very tough time falling precipitously. There's always strong pullback's to unwind overbought conditions in the short-term, but are tough to kill bigger picture.
Secondly, we have the situation regarding sentiment. There's not enough people believing in this market right now as evidenced by the bull-bear spread of only 17%, more bulls at 43.6%, versus 26.6%. Until we get readings near 35% on that spread, the bears are likely to be very disappointed with this continuing bull market. It will take a lot more upside action before the bull-bear spread gets to 35%, or thereabouts. There are two powerful forces behind this bull market. The only hope that the most ardent bear has is a disaster to the financial system that takes the global markets down, and down hard. Outside of that, it seems as if the bears will have to accept that we're in a bull market for some time to come. They'll have their day again, but it's not upon us in this moment.
The iShares Barclays 20-Year Treasury (TLT), or the ETF for the bond market, has broken down this week, and is yet another sign that folks want stocks, and not much else. Really, who can blame them. Why own bonds in an environment where interest rates are so low, and will stay that way for some time to come. The iShares Barclays 20-Year Treasury (TLT) had been trading in a range for some time between 115.00 and 121.00. Then, this week, we saw that area of 115.00 get taken out with big volume, signaling that the market is riding the stock train and nothing else for now.
As always, there will be rallies along the way, but 115.00 is now massive resistance on any move higher. That should get knocked down hard, since the volume on the breakdown was heavy. It's key to respect a breakdown when it takes place on massive volume, such as this iShares Barclays 20-Year Treasury (TLT) breakdown. Don't try to chase too many moves lower with a long play on it as the trend is now bearish on it. If it can close back above 115.00, with some good volume, then that's a different story. But for now, consider the iShares Barclays 20-Year Treasury (TLT) a broken vehicle, and adjust your thinking accordingly on this bond ETF.
The charts in this weekend's letter tell the story pretty clearly. The weekly charts are showing some great breakouts technically. Take the time to study them for a while, and try to see how this has all unfolded. When you get breakouts on the weekly charts, that's very powerful. Of course, something can always come along and ruin what the charts are currently displaying, but in a normalized environment, these types of breakouts usually transcend into a longer period of upside. The breakouts measure much higher. No need to go into that right now, but the message is clear. Do not fight the tape when these types of breakouts occur, unless some outside shock event allows the breakouts to get taken away. You can't play for an external event, so all you can do is play what you see. Take some time to realize what these breakouts look like, and can mean potentially for this market over time. It tells us that any weakness from overbought can still be bought up.
We have not cleared 1400/1410 cleanly, so that remains our next area of resistance to clear. If we can do that, it's possible that 1440 would be next up on this run-up in the stock market. On the support end of things, we now know 1370 is massive support. Check the weekly S&P 500 chart tonight for that visual. It's not likely we'll be losing that level of support any time soon, although a back test is always a real possibility. Below that we have support from 1363 down to 1355. The trend remains higher and, thus, use weakness when it arises to buy good set-ups.
Have a nice weekend everyone!
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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