Yes, today we saw breakdowns below the 50-day exponential moving average on the S&P 500 and Nasdaq. Yes, today also took out the tops of those huge gap ups. Not good to see if you’re a bull. However, it wasn’t a resounding breakdown. The short-term oscillators got a bit oversold, and the bears could do nothing with it. In more intense breakdowns, you get oversold and stay that way. Not the case today at all. The market barely fell after the open of trading for the rest of the day with the bears, basically, happy it seems, just to get below 1225 S&P 500 by at least one percent. That is a decent breakdown. However, there was no impulsive big time selling to go along with the move lower. Just a slow leak down. The bears really did nothing to show they’re now in total control of things. More control, I’ll give you, but total control, not at all. So yes, the bears are feeling better about themselves tonight, but they really shouldn’t be celebrating anything, especially since the news keeps getting worse, and they’re still struggling to get the job done in a big way.
Think about it folks. The bears have massive warnings from leading stocks all over the market place. The bears have continued bad news coming out of Europe, and most recently, the bull’s very best friend, the fed, let them down in a huge way yesterday with no immediate promise of monetary stimulus. Enough bad news to annihilate this market, yet the bears refuse to take the gifts handed them, and really lay on the pain to the bulls. So with all of this, the bears are feeling better, and they should, but let’s see them do something more significant with all the bad news out there, and then we can truly be impressed. The market is below key 1225 support, but with all the bad news, the market basically continues its lateral move bigger picture.
There were a large number of breakdowns today in individual stocks led mostly by the commodity world, which was in mourning over the fed not giving them the candy they wanted so that they could keep moving higher. No inflation from phony printing of dollars at this moment in time at least, said Mr. Bernanke. The in-fake inflation trade is off the table for now, and the real world of the deflationary trade is upon us. When that happens the commodity stocks get smoked the way oil, gold, silver and generally every commodity did today. Gold and oil ripped apart today with moves down not seen in a very long time. Gold and silver continue their bear markets, while many other commodities are just joining in on the fun.
There were massive breakdowns today in the last group of hangers on such as Caterpillar Inc. (CAT) and Deere & Company (DE). When the very best lose all their support from the exponential moving averages, you know there’s trouble. They did so on increasing volume as well, which confirms the moves. When gold barely moved higher on the massive infusion of cash to Europe through the world banks, you knew something wasn’t right. The trade full, and the bubble bursting, in front of our eyes. It reminded me of when AOL got broadband and fell. The bubble in the stock and the stock market was done. That was March of 2000, or the top of the bull market. Until the fed offers up QE3, which in time he will, I believe, as these stocks will struggle mightily.
The bears are smart, and somewhere in the back of their collective minds, they know the bulls still have this powerful friend in Mr. Bernanke. The fed Governor will eventually employ QE3 when he thinks the market needs it to survive. With our economy slightly improving, he doesn’t want to blow his bullets until he really needs to. Only when the market is in extreme duress will he let it fly. The bears don’t know what that level is, and neither do the bulls. No one knows. Even the fed may not know yet. He may simply be watching a certain level told to him by his experts on the stock market and only when that level is lost will he inject the cash into the banks. The fear of the fed may be holding the bears back a bit here as they are fearful of the big announcement. This may be why there was no impulsive action to the down side today even though we did lose S&P 500 1225 support. It should have been much, much worse than it was, and may get there in time, but today should have been far worse, and the reason it wasn’t could be Mr. Bernanke.
1225 S&P 500 is gone by one percent. The bulls need to capture it back quickly. Very quickly. The longer it stays below, the braver the bears will get, and the more likely it is we will start to see the bulls give it up. If we go lower, 1195 or the bottom of the big gap up is on deck. After that we have horizontal support with two tails at 1160, and then the weekly trend line at 1140, which the bulls desperately need to hold on to. Below 1140, it gets very ugly very fast for the bulls. 1265 is now a fantasy until the fed offers up QE3, and who knows from what level he’ll do it, and how much of an effect it’ll have on the markets this time around. Cash is key here. If we fall further, and then back test 1225, that’s when it’ll be safer to short.
Peace,
Jack
