Are The Market Bears In Trouble?
Jack Steiman | Jan 07, 2015 11:50PM ET
The bears did something today they didn't want to do. While the market got very oversold, the last thing they wanted was to allow the bulls to have a large gap up to start the day, and a gap up that held a lot of its gains. This now allows that gap up from yesterday's close at 199.82 to become solid support. The bears don't want any support in the patterns now. They wanted things to grind along from oversold, and then bang this market lower again. That can still occur, but the work will be more difficult since the gap up is so large many bulls will defend it if it gets back down to that level.
A small gap would have been fine, but an eleven point open gap certainly makes the job far more difficult. You could hear the sigh the minute the market opened from the mouths of those bears, and the sigh grew louder as the day wound down as the gap remained open and quite large. An easy job just became a much harder one but the bears should be used to that by now. 202.72 was today's high and that level failed late as it was trying to clear the 20-day exponential moving average on the short-term sixty-minute charts, but failed to do so. So the range is there for all to see. Use your vision and not your emotion to play it. In between those two levels is nothin, but emotion. We need a close above 202.72 or a close below 199.82 to probably get a more directional move going. Let price be your guide.
This is clearly a market in which you have to be very careful where you go if you're looking to go long. So many old leaders are now in clear, established bear markets. Stocks such as Priceline.com Incorporated (NASDAQ:PCLN), Google Inc. (NASDAQ:GOOG), Tesla Motors, Inc. (NASDAQ:TSLA), Amazon.com Inc. (NASDAQ:AMZN), and Netflix, Inc. (NASDAQ:NFLX) to name just a very few. The list is hundreds long and increasing. Apple Inc (NASDAQ:AAPL) teetering on breaking down but not there yet. The bulls don't want to lose a leader that heavily weighted. If AAPL enters a bear the bulls are toast with regards to the Nasdaq.
The problem has been the fact that old leaders are dying out, but we aren't getting new ones to fill the lost spots. A sign? Perhaps but never forget the rules of a bear, which haven't shown up yet. Severe failure of the lost 50's on a back test along with massive distribution in terms of volume off tops, etc. It's possible the market is simply correcting internally those old leaders for a period of time, while allowing price overall to hold up through other sectors like health care, biotechnology, and a few other areas scattered about. Stop trying to chase those old lost warriors that have entered the land of the bear. Try sticking with the ones still working or simply move towards ETF's on the indexes. Safer and less volatile. The market isn't what it was. Too many are no longer good even when markets rise. Be smart and stay away from the weak.
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At this moment in time it's virtually impossible to tell where we are going from here. Some weakness would help the bull-bear spread. It moved down from 41.5% to 35.3% this past week. Some selling this week would help it move towards getting it below 30% which would be very healthy and necessary for the bullish case looking out in to the future. Froth has been so high for so long we would all welcome a move back down in to the teens on the spread, but for now I'd be thrilled with any reading below 30%. The market overall is still quite unclear. We have the range set for the short term. We watch it closely for a deeper understanding of the game we play.
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