Explosive Stocks Bear Market Rally Testing Resistance

By: Jack_Steiman

Oh how sweet it was for the bulls with one hour to go. All three major indexes, including the two most important, the Nas and Sp, we're well above their 20 day exponential moving averages. The bears were staring at a situation they probably didn't think humanly possible when they woke up Monday morning this past week. The market had exploded up and was now testing the area where all bear market rallies go home to die a quick, painful death or better known as those 20 day moving averages.

We spent Wednesday and Thursday testing and failing and testing and failing again and again. Today it would not have been unusual, after so many failures, for the market to give it up to the bears and just crater down hard before trying again some days in to the near future. That was not to be the case. Futures were lower and things didn't look great early on once we opened but it didn't take more than about ninety minutes in for the bulls to start gaining control of the action. It tried to take out those 20's but it kept getting pushed back. Then quite suddenly, and as usual when no one is expecting it, the market blasted through and did so with force.

All three of the major indexes were racing up and the bears appeared to be toast. Ah but not this market. Just when something appears to be going one way, it takes on a completely different look just minutes later and today was no exception. We fell very hard and very fast and almost went red when in the last ten minutes the market rose back up once last time and finished with some nice gains overall. Here's the joke of it all. The 20 day moving average on the Sp is 970. It closed at almost 969. Are you kidding me!! The Nas closed at just a hair under 1721 and the 20 day is at 1733. The Dow closed well above its 20 day but because its only 30 stocks it doesn't hold as much market weight as the Sp and Nas. With both of those finishing just under their 20's the big boys left the whole world wondering what next.

No real failure and clearly no real success. More of a failure really but there's a saving grace I've been talking about throughout this whole rally and that's the breakdown on the Vix. It's on a major breakdown itself with a close under its 20 day at 61.45 as it closed in the 59's. Very good news for this market. A terminal pattern as well as it has three lower stochastic's on three higher price readings. Add in a regular negative divergence on the Macd and it says it wants lower overall which we all know is very good for the market.

Now this has been one weird bear but this Macd breakdown has allowed for one super rally thus far thus I take the Macd breakdown cross very seriously. It's been a good barometer since Monday and therefore if it follows through, the market should be trending higher overall in the days and weeks to come. It doesn't mean up every day but it does bode well one would think. Again, because it has been reliable, you have to give it the benefit of the doubt.  The good news from today has to be the fact that even though we didn't make those 20 day breakouts on the Nas and Sp, we did have a fabulous advance decline line yet again. This was just about the story every day this week and the fact that it continues means most stocks are breaking out of old bad patterns and this is a huge plus for the market.

Up to down volume was solid as well and volume continued better than average. All good signs and if this continues just a bit longer, the 20's will get taken out by the bulls and then we'll be talking about those elusive and impossible to penetrate on the first few try's 50's. If we ever got to the 50's it would be very likely that the market would suffer a very intense selling period shortly thereafter. Let's hope we can talk about that in the weeks ahead.   There are some troubling signs from the past few days that need a quick talking about so as to be fair about the whole story. Stocks that need to perform as leaders are still struggling with the key stocks on the Nas being Bidu and Goog. When the market is truly powerful so are these two giants. They are struggling big time. Bidu crushed today and threatening to lose 200.00 support. it needs to hold here. Goog can't bid since its earnings report last week and it was a strong one so no excuses.

Those two stocks are barometers of health and for now they are sick and need to get involved if the Nas is going to take out 1733. The banks are also under performing overall and without the financial's getting very involved it'll be more difficult for the Sp to make the move and have it stick. It's been failing because this sector can't get out of its own way. A must watch for the near term for sure.  The market isn't making the big move over the 20's but it is at least hanging tough and there is something to say for that. Again, let me remind you that quite often, in a bear market bounce, the indexes hit the 20's and just give it up hard and fast. Not the case here but still no real success to talk about since the big move from early in the week which was nice but not enough.

I do believe there's a solid chance based on the Vix daily that the market will make the move but there are absolutely no guarantees and thus the reason for how we're playing things. It was a great week for us with everyone making a lot of money but this game will take it from you in a heart beat if you take your eye off the ball. It has no mercy and thus it is essential we obey the messages and the message says nothing more aggressive until we clear those 20's or get a strong pull back from which we can enter.

Let's just keep trying to do what we have been.   

Enjoy life. Play with a child if at all possible.

Have a great weekend. 

Peace

Jack

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