Euro Summit Gaps Stock Market Lower
Stock-Markets / Stock Markets 2012 Jun 26, 2012 - 02:26 AM GMTBy: Jack_Steiman
The Euro Summit is upon us with many questions still unanswered, such as how Greece and Spain will receive funds for bailouts being the primary issue at hand. Everyone is looking for Merkel from Germany to step in and support it all. She, however, said over the weekend that she will have none of it. The Eurozone was not happy about this, thus, all of it sold off while we slept last night. This, of course, allowed our stock futures to fall hard into the open today. We gapped down and never looked back. Nothing horrible, but an overall downer of a day for the bulls as it was mostly a gap and run day, instead of the far more bullish gap and churn, which turns red hollow late.
We closed well below the gap down open, thus, the bulls have nothing to feel good about as the day ended. The Summit is ongoing this week, with the Eurozone trying to figure out how to handle their debt crisis, which in turn will work for, or against, our own stock market. This will naturally cause quite a bit of churn, but we should all be used to that by now. All we ever do is churn to nowhere, so why should things be any different in this moment!
Even though things are really bad, it doesn't take very much to get a market turn back up, thus, even the slightest bit of good news will turn this all around. However, should there be no true resolution, the market is very vulnerable due to the fact that many of our oversold daily oscillators have unwound back up quite a bit. There is plenty of down side room should the market want it from a technical perspective. Bottom line is today we saw more uncertainty from Europe, and once you add uncertainty to a bad situation, the path of least resistance is clearly lower.
The fed sits and watched. He contemplates what to do if certain situations arise. He is watching this Summit is like a hawk to be sure. If things fall apart in the Eurozone, because Merkel acts appropriately, he will be there to do what's needed should the market then being a precipitous fall. He's only interested in keeping our economy up through the stock market, and apparently cares very little, if not at all, at the consequences of his actions by flooding continuously with cash. He is one determined Fed Governor, and is ready should things start to get out of hand. The bears know this, and quite often, this is what keeps the market from falling too hard.
The fear of the Fed is as powerful as any of his physical actions. It's tough being a bear when you're not in a free market environment. And folks, we're not! No matter how bad things are, there's always the printing press, and for some reason, the market loves the printing press. It shouldn't, but for some unknown reason, it really does. I think it's waning a bit, but the market still loves its free juice. So in the end, the bears fight the fundamentals and the Fed. Is it any wonder, with all of the problems out there, we're still nowhere in terms of being bearish in the market. It could still happen, but it hasn't yet.
If we study the long-term weekly, and monthly, charts of all the major indexes, along with most of the leading stocks such as Apple Inc. (AAPL) and Caterpillar Inc. (CAT), you can see that things don't exactly look super for the bulls. Moving lower can take a long time. Distributing things lower is often a very arduous task for the bears. It would make the most sense for this market to ultimately go lower based on those weekly, and monthly, charts, but you never know what news may come up to turn all of those bearish looking longer-term charts into a more bullish set up. On the daily charts we see nothing bearish at all.
We're now trading between two wide open gaps, the gap down created by today's gap down and run, and a large eighteen-point gap up from a few weeks past. That gap up is from the bottom at 2778, and the top at 2796. Only if the bears can remove the 2778 level would we say that things are more favorable for them. Only if the bulls can get above Friday's close can they say they're in really good shape. In between is noise as is the open wedges we're still seeing in big picture on the daily, and weekly, charts on many of the key indexes.
It's confusing and difficult to say the least. So for now, we watch and play very lightly when an opportunity presents itself. Go very slowly here as neither side has any real control.
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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