Stock Market Reversing Lower....Range Bound....2020 and 2116 Is The Game

By: Jack_Steiman

Just when it felt as if all was good with Friday's big upside stick things turned right around today and headed lower with force. Not as bad as Friday was good, but a nasty reversal. More importantly, it stopped the big move up dead in its tracks. No follow-through, which is what you get in an ending bull market. But again, that still doesn't mean we won't try higher again and again for weeks or months to come. It's just that this is the type of action you see near long-term tops. Lots of head fakes both ways. No one thought we wouldn't follow through today, or at worst, pull back gently to work off some overbought, sixty-minute, index-stochastic readings. The mood wasn't one that was about getting smoked after such perfect candle sticks on Friday, but the bulls were dealt a technical blow today with the gap down and run.

Bullish on Friday was bearish today, and, thus, welcome to the market for what it is now. Doesn't feel as good as 2009-2014. 2015 has been a dud. A whole year of topping-like action but the bears have yet to make the big move. They have yet to take out S&P 500 2020 with force. Once they do, the bulls will be on the run, and the bears will likely take control, but the onus is on the bears to do what they haven't been able to do for quite a long time. It looks bad with today's poor action, but maybe tomorrow we're up 200 again. You never know as the two sides fight it out. Traders are used to buying and succeeding when buying bad days, so don't give up if you're a bull, but know your journey hasn't been and won't be easy. The new market is not nearly as joyful as before. All good things end over time. The market is no different, but again, it doesn't mean the good have totally gone away just yet. The weather changes rapidly with this market.

Look folks, I can fabricate things by saying the good times are here to stay. They're not. There's no way to know the timing of anything. We don't decide the timing. The big boys and girls do, and who knows when they'll put the volume pressure on the bulls to create a long squeeze. It's coming, but we have yet to see classic topping patterns. No massive volume moves off the top, or at least no major gap moves off the top, which tells you something bad is brewing. Froth is no longer a problem and won't be for years to come, but most importantly it's not now thus we don't need to fear too many bulls being in.

There is plenty of doubt now. That helps the bulls keep the dream alive, but, at some point, they're going to have to overwhelm the bears enough to allow for a move to and above 2116 on the S&P 500. Only then can they get the bears on the run once again and create a short squeeze allowing for a test of 2134, or the old high. With those monthly charts so bad I often go to sleep wondering if the next morning the S&P 500 futures will be down twenty, thirty or even forty points before the open. I know the fed Governor's around the globe are working hard to keep the markets up with their promises of easy liquidity, and so on, but you wonder when the party will end. I can't say how long they can prop things up as it's been a lot longer than I thought humanly possible. But I always have nightmares these days about the market's prospect going forward. It's just not pretty when those monthly charts are now being joined by contracting manufacturing and a declining month over month services sector. The good old days are gone so be careful.

These are fast markets. Things happen a lot more quickly than they ever have before. Machines kick in and take things up and down far more rapidly that we've ever seen in the past meaning if things break one way or the other you have very little time to respond. If we lose 2020, we can see 1951/1954 in the blink of an eye. The markets swing about with a lot of gusto, but if we lose 2020, it will seem like a bolt of lightning hit. Know the level that tells you to walk away if you're long. I really have a hard time imagining a move over 2116, but it is still possible. The right news can hit at any time without warning for either side to gain full control. Be aware of what really matters. 2020 and 2116. Be safe. Today's action was on very light volume and only retraced about 40% of Friday's up move so nothing devastating. We can still go higher. Nothing is etched in stone.

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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