Gap Down Holds....Market To Nowhere Continues But In A New Lower Range..
Jack Steiman | Sep 01, 2015 02:19AM ET
There was a long-term base that never seemed to want to go away. The S&P 500 2040 to 2134 range kept on chopping around in what seemed like an eternity. Month after month the range held, but with so many head fakes for both sides. Hope abounded for both bulls and bears alike. We'd get to the top of the range off of some very good price action only to see the rug pulled out, leaving the bulls feeling frustrated. The same would happen in reverse to the bears. Each side would get their fill of hope and despair, but in the end the market would stay in the 2040 to 2134 range. After some really bad monthly charts, and too much froth caught up with the bulls, the bears finally won the war with a strong break below 2040 on the S&P 500. They knocked the S&P 500 all the way down to 1863, the new bottom we must focus on for now. A strong rally ensued, but it fell far short of getting back to that old 2040 level. Then with today's move lower, it seems a bear flag is indeed forming, which is what I expected would occur. No guarantee, yet, on that set-up, but the process is unfolding.
If it holds true for days to weeks ahead it would set up another move lower. No way to know for sure, but we can say for sure, or at least the moment, is a new range is setting up. A lower range than the last range, sadly if you're bullish. No fun. More whipsaw, but from lower prices. While the bulls have two strong gap ups from underneath today's gap lower, and hold by the bears, made things a little tougher again for the bulls. The flag, thus, setting up. The market is tougher to read these days, but if we keep it simple we know now that 1040 is massive resistance with the 20-day exponential moving average roughly fifteen points below that, so that creates a double wall of resistance. 2040 seems quite elusive right now for the bulls. We'd need to break below 1863 to get the next leg down under way, so for now we're in a new range with lots of headaches for the bulls overhead. No fun for anyone. More whipsaw likely the way things will be. Adapt or lose your way. Be smart and don't over play. This range is larger than the one we just lost. Doesn't that seem like fun!
There's always a price to pay for too much of anything, it seems, in life, and now the market is paying back all the bulls for the past year for all the froth it had to deal with. It's not a bad thing, and the market isn't in terrible shape. It's just not much fun since upside is no longer very easy the way froth allowed it to be for so long. We all reaped the benefits for quite a long time, so gratitude should be the way you think about it. Now, just think of the market re-setting itself. The monthly charts are actually starting to unwind. Nowhere near enough, but a start nonetheless. We have to start somewhere. The bull is quite powerful, and, thus, I would never count the bulls out, but things seem to have started in terms of unwinding those grossly-overbought, longer-term monthly charts. They were so nasty I had a hard time looking at them and ever putting out a play. It worked, those longs did, for a long time, but the good times are basically over for now. They'll come back again someday. It just may be longer than we'd like. Anyway, until we clear back over 2040 on the S&P 500 with force, we are in the new trading range from 1863 up to 2040. Let the fun times begin. Or not. Play appropriately. Don't force. Cash is a good thing now.
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