Stock Market 20-Day Back-Test Failure.....2020 Getting Closer....

By: Jack_Steiman

The market is slowly, but surely, turning. We haven't taken out 2020 on the S&P 500, yet, so there's nothing to get bearish about. But you can see the subtle changes. The market head faked the masses today as these markets tend to do by blasting, and I mean blasting, up and through the 20-day exponential moving average. The bulls are in full control, or so it seemed. That's when a tiring market, such as we have kicked in, and left the buying bulls feeling bad about those purchases. About chasing the rally. The market fell, and fell hard, initially letting the bulls know they had made an error in their constant bullish behavior. A swift move below the 20's, and the selling was on. It's always about knowing where you are in the market in terms of bull, bear, or agnostic. Then you have to determine if the agnostic market is really a market sending a new message.

Are they telling us that the old market is gone and a new market is here, or at least transitioning to something new. That's what this agnostic market feels like. While we're still above 2020 on the S&P 500, the action is telling us that some type of change is taking place, and it says you need to be more than very careful about what you do while playing. The biggest mistake folks make is that they think they always need to be playing. No you don't. You don't ever always need to be doing anything in this game. It's the inappropriate, over playing that kills the masses over time. So while you may not like it, the agnostic-market message seems to me to be saying you need to relax until we have better information. The more you play here, the more likely it is you'll be feeling some pain. Less is more, for sure, for now.

There are many signs out there that things are uglier than total market price. The action in the world of transports, housing and industrials is telling. These areas are in confirmed bear markets. No one would argue that these are in confirmed bears. They are simply awful with non-sustainable upside for some time now. These are obviously all due to a weakening economy, especially on the manufacturing side of the equation, although the services end is also weakening. Housing is slowing, and with the rates that are available, they will slow further. The transports are getting killed, because there's less to haul as the global slow down accelerates.

Oil alone is killing the world of the railroad stocks. Industrials are the same as things slow all over the world. Many old leaders, such as F5 Networks, Inc. (FFIV), can't seem to bid in the world of technology, while Apple Inc. (AAPL) couldn't take out a gap down, and after many attempts to do so has now turned south. The signs just aren't great, so the question is whether the global economy is about to recover. There are no signs that it will, and that's with the world fed Governor's doing all they can to keep liquidity at all-time record levels. It's just not working as folks won't risk high-level loans in a slowing economy. Over time it appears more and more key sectors will be transitioning into bear mode. We shall see.

Bottom line is the world of technical analysis. The 2020 S&P 500 level is the number. If we lose that level with a bit of force on a closing basis, then we have a real problem for the bullish case. If there's some decent volume on the break, all the better as a confirmation. We don't have to have the volume increase as markets can fall on almost no volume if the bulls are all in. 1954/1951 gap would be next up. Only a close over 2116 opens up the bullish scenario for another leg up. We're nowhere in between these two levels on a closing basis, and that should be completely respected no matter what the market may feel like. Know where we're at. It's not the safest place, for sure. It's dangerous, and should be looked upon that way. Don't be a hero unnecessarily. Respect the key word here, and if you have it along with some patience you'll be just fine. Go against the grain, and you'll feel the pain. No need for that to become a reality.

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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