Stock Market Nothing Bearish At All ...Jobs Hotter Than Expected....

By: Jack_Steiman

Markets never change in this regards. When RSI's get overbought on those sixty-minute short-term charts it usually precedes a selling episode of some kind. Market sell in different ways. It can sell in a bearish fashion which means the oscillators lag the selling in price. It can sell in a bullish-fashion, meaning price doesn't fall much, while the oscillators reset quickly. This is what we've seen for the most part over the past many years. The RSI on the sixty-minute chat on the Dow hit 75 today, while the Nasdaq and S& P 500 hit 70.

The bulls tried to hold things up, but the inevitable selling kicked in which now has our RSI's averaging about 57. It can go lower, for sure, but it's a good start. And for that matter, it can just go back up from here. We'll see on Monday, but the one thing for now that can be said is that the selling was normal for lack of a better word. Nothing bearish at all. It can turn in to something more ominous. Never count out that possibility, but for now all we can say is that today's selling was normal technically.

There shouldn't be too much more selling barring unforeseen news over the weekend.

Rates shot up today based on the jobs report, which came in a bit hotter than expected at 257,000 jobs created versus 237,000 expected. This was the news wanted to hear in terms of an accelerating economy since all the other recent reports have been so poor. An accelerating economy is consistent with the concept of a fed eventually raising rates. It's the topic of the day almost every day it seems. When will they raise rates? The answer is really an easy one. When all of the key economic reports start coming in positively from the GDP to manufacturing to durable goods to ultimately employment. Having just one good report isn't going to do it.

In fact, it would require a stretch of solid reports across the board before the Fed would finally pull the trigger on her first 25 basis point raised in rates. It will be interesting to see how the market handles that news after the initial crater lower. My bet is it would recover for a while at least but would ultimately fall very hard if the rate hike becomes the first of a cycle worth of rate raises. Then the market will probably enter a bear, but for now we're a long way away from that first rate raise. She's a scared fed who hasn't seen close to enough good news in those key economic reports so patience for those who want the cycle to begin.

The earnings season has been mixed. Probably the worst quarter I can remember in quite some time. Yes, there have been plenty of huge winners but by far there have been misses that have equated to huge hits to individual stocks. Many of them have caused bear markets in those individual names, but as usual the market has used rotation as an answer. The story of rotation has been with us for years now. This will be the first huge hint that things may be changing down the road. When money stops trying to find a home then we know things are changing from bull to bear.

Folks, keep track of these good reporters, and when the selling comes they sell off the least, while the bad earners keep taking it on the chin, thus, the lesson is clear. If playing long you should stick with the stocks that had full candles up on their earnings day. Conversely, if you need to short because you have a bearish bias, simply focus on the full red candles on stocks that had a bad report. Try to simplify the most difficult game around. It's never easy but this process of what you get in to short or long really isn't difficult. As time moves along we keep an eye on the best stocks to see if they can maintain their bids. As long as the best are treated with royalty we know things are still bullish big picture. Use weakness to buy. Otherwise i would say remain peaceful. Don't over play out of greed.

Have a nice weekend!

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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