Stock Market Some Selling...Oscillators Weak...Will It Matter?...

Stock-Markets / Stock Markets 2016 Aug 11, 2016 - 09:34 AM GMT

The market tried to sell, but wouldn't after gapping up a bit this morning. It would sell and naturally it would come right back up. This is normal protocol with this market. Today the market tried a bit harder to finally sell some. The question being asked is whether it's the real deal, or not, and to that I say, why judge it! The oscillators on the daily charts stink. Plain and simple. They stink. They're extremely elevated with positive lines trying to cross down below negative lines. They've been overbought over and over for quite some time. These issues unto themselves are reasons to have a pullback. Don't start thinking about bear markets just because we sell some.

You know I believe we should be in a bear market, but that's not the case thanks to low rates and lots of free liquidity. The market has to show things it hasn't in over seven years to start thinking about a bear market. Distribution off the top would be a good start. None of that occurred today. Not even a drop. We simply sold some because of overbought, elevated oscillators. Simple as that. Take it for what it is. Don't get emotional with it until the market says it's smart to do so. Emotions run wild in a market that's so disconnected from reality. Most folks recognize that we should be selling and that this bull market is as inappropriate as it gets.

When that reality exists, it doesn't take much selling to get folks all frothed up about here comes the bear market thinking. We're nowhere near that right now, and shouldn't even be thought about until the bears can forcefully take back S&P 500 2134. The market should sell more if these oscillators fully play out. Will they? They've struggled to do so, but the set-up is there if the bears can muster up some guts. It would actually be quite healthy for the bulls if we did sell some and create some oscillator space to move higher still over time. So today saw some selling. Nothing to get excited about, however, if you're a bear. Not yet. There's a long way to go before the bears can get happy about price action. We'll see how much we sell in the coming days. Nothing is easy for the sellers.

We must not forget that the stock market is no longer what it was at one time. The control factor is now front and center. Classic technical analysis does NOT work the same way as it used to work. It's a lot of learning on the fly mentality now. Black candles that used to call tops on stocks rarely work as they used to. The list is long as to how things have changed. All of this due to low rates, of course. Under normal circumstances, with the look of the daily index oscillators in conjunction with froth rising it would be a slam dunk to expect at least a 3-5% pullback. The bull/bear spread is now up to 33.4%. That's a very high reading. Under normal circumstances that would be a get out of stocks reading.

35% is extremely high, but we saw 46% last year thanks to low rate, so it's hard to judge the moment things will snap lower with force. That said, we do have overbought, elevated oscillators with increasing froth and negative daily index chart divergences. Not the best combination of events that usually leads to higher prices. In this environment we may just blast out, but we shouldn't. We should sell some more but that remains to be seen. Respect the problems that exist. Don't over play. Do what feels right to you, of course, but keep in mind that conditions, under normal circumstances, are not very good for the bulls. In the end, bigger picture, S&P 500 2134 is the key for all sides.

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.

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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