Stock Market Vision Cloudy...Continues Lower....
Stock-Markets / Stock Markets 2012 Nov 10, 2012 - 10:42 AM GMTBy: Jack_Steiman
Cloudy vision is what the market tries to avoid. It hates uncertainty. That's understandable. In the real world, none of us do either. The market is trying to understand what now. With the fiscal cliff dead ahead, who is going to step up on both sides and make something positive happen by meeting somewhere in the middle of each sides belief system. Is it possible for both sides to come to an agreement by checking their egos at the door? In the past, that hasn't proven to be the case and this is what really bothers the market right now. Even today, we heard from Boehner and Obama and both talked about hoping to be able to agree to something. That's not what anyone, especially the market, wants to hear. It wants to see them walk out together to announce that they will work ceaselessly until they find a cure. They will do whatever it takes to make the fiscal cliff become a bad thought that never became a reality.
The market is not feeling good about the chances of things working out, and thus, you see how poor the action has been since the election results became known. It is clear the market wanted a more pro-business leader in Romney, but beyond that, it also wants a new normal of both sides working together, no matter who is in office. Right now it's the old way of life. Not good for the bulls. Very good news for the bears. So the market has spoken and it's trying to tell the big boys that ruin, I mean run our lives, to get going. Make things happen in a positive way and show you're putting the people of this country first and that you're willing to leave your egos out of the game for once. Just once!
The selling since the election was across the board except for that good old standby, Add SPDR Gold Shares (GLD) and silver to the mix. The same old folks. No matter where you turn, sector by sector has taken it on the chin. There's nowhere to really run or hide. Semiconductors and transports were healing up very well, only to see them both fall away. Software and hardware. Retail. And so on. Just nowhere to go.
Apple Inc. (AAPL) had a small bounce today, but is down over 155$ off its recent top. No mercy for the very best of the stock market world. The market's focusing lately on the highest P/E stocks that are so violently overvalued. Sure, everyone is getting hit to some degree, but if you're a high P/E stock you're really paying a huge price with action to the down side. Often you can find safety in the lower P/E and higher dividend stocks, but the move lower has taken these stocks down as well. That's when you know you're in trouble and that the market is trying to send a message across to everyone in charge.
Markets do try to send messages, folks. If it's not happy with what it sees it reacts with forceful moves down. It's like a little child trying to get its parents attention. It will do what it can to get noticed and a large move down over a few days is its way of trying to get noticed. Now that there's no safety anywhere it foretells of more selling to come since few will step in willingly until we get more clarity from both the democrats and republicans alike. Without certainty, or news to make the child feel better, the market will, over time, move lower. It will move lower throughout the stock market world just to be sure the message is heard.
What you all want to really know is, are we now entering a new bear market. Fiscal-cliff problems that don't get solved and send us into a strong recession can, on its own, send a market reeling in to something bad such as a nasty bear market. We hadn't seen anything really bad in terms of distribution regarding volume. Some stocks are still being rewarded on their earnings reports, meaning good news is accepted as such. We are not complacent. We don't have many of the usual ingredients that can help start a new bear. However, just like when we had the financial meltdown, something terrible can start a new bear without any of those ingredients. It's possible we are about to start a new bear and watching the Nasdaq slice right through its 200-day exponential moving average, along with the Dow, makes one wonder. Normally that level would be touched and the market would explode if it's healthier and in a bull market.
Not this time. The S&P 500 got to that level and did hold but not exactly in a resounding fashion. We're not seeing the type of price action one would equate with a healthy market environment. There's no way to know for sure what's happening, but again, we need to see something special take place in a positive fashion out of both sides to prevent the United States from entering into a recession. If the market smells that this won't be the case and that we will enter a recession, we will see the market fall a lot more than it already had and a new bear will begin.
In the end, with the Dow and the Nasdaq already below their key support levels or the-200 day exponential moving average, only the S&P 500 remains above, and this leader is barely above. If the S&P 500 loses 1375 or that huge level aggressively then the market could literally free fall. The Nasdaq needs to take back 2954 and the S&P 500 needs to hold above 1375. If it joins the Nasdaq below 2954, things will likely get ugly very fast. So know to adjust accordingly should that take place any time in the future.
I wish I could be more positive, but in the end, it will come down to our leaders getting together to make sure it all works out regarding the fiscal cliff.
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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