Stock Market Refusing To Fall....Sentiment Peeking Above Zero For Spread....

Stock-Markets / Stock Markets 2016 Mar 03, 2016 - 08:22 AM GMT

The market got a plethora of happy news yesterday, which began with China's central bank deciding it was time for yet another stimulus program. In addition, we heard Mr. Draghi of the Euro zone promise more help on the stimulus front, and lastly we had a better than expected, although still contracting, ISM Manufacturing Report. A triple play of good market news.

The market rocked higher on solid volume. It got overbought, thus, it was time for some selling, which we got early on, but refused to stay down very much as the day progressed. We closed, basically, back at overbought, but the market is showing no inclination to start any major decline at this moment in time. The good tidings of buying all dips is back in vogue. Folks, want back in so whenever we drop we see buyers blast right back in to gobble up whatever they can get their hands on. It's like old times but the question is whether the good times are really back or is this just a rally that's destined to fail as the days move along. There is no clear answer to that.

We will know best when we get the next bout of selling what we can expect down the road as we watch how those oscillators behave on the selling. If the oscillators do not confirm price, then that's bullish. If they do confirm, that puts this particular strong up move in question for further gains down the road. The move up has been confirmed by the oscillators 100%. Good news for the bulls without question. Now we see if we sell without the oscillators giving it all back up. It will be very interesting to see how those oscillators behave. It'll be more than important to follow them as price travels lower in time. To be totally honest, we can't know what we really need, until we get that selling with a bit of force. For now, the market seems to want to stay overbought for a while longer. Maybe we can get some selling once we get near 2000 resistance on the S&P 500. For the very short-term we watch how far the bulls can take this higher.

The bears were rocking in big time and had the spread show two readings below -10%. -13.2 and -14.5%. Now we're up to +2.1%. A few weeks upside action has the bulls coming back, and the bears are going back in to hibernation. That said, we're only at 2.1% positive. That's nowhere near too bullish, so still absolutely no worries for the bulls on that front. It would take many months of continuous upside action before we'd run in to any trouble. Sentiment plays a big role at extremes, and the bull-bear spread below -10% is extreme and can take a long time to work off so we shall see. The bull run we're seeing in equities probably has a lot to do with short covering. Although that's a normal part of things in any market the level is much higher now since the short interest sky rocketed as the spread went below -10%. Volume on the up side hasn't been great but it doesn't need to be. Markets can rock up on light volume for a long time as long as shorts continue to cover.

2000 is key resistance for this market. That's where the highest exponential moving average lives or the 200-day. If we blow through that level and we take out a trend line on the VIX at 17 this market could absolutely explode. It shouldn't happen, at least initially, but we have to keep an out for that. You never know what's next in this insane game known as the stock market. No one would be expecting such a move to happen so quickly, including yours truly, but I will be watching out for that in case it does occur. We're likely too overbought short-term for that type of move to occur, which is why it's so important to see how the price/oscillator relationship behaves on any selling. Bulls are in control short-term, but again, we are overbought so it's best to buy selling off a reversal stick to come.

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.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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