Top In? Nothing Bearish But Late Failure
| Sep 21, 2014 01:00AM ET
Interesting day. The market gapped up at the open and ran higher. It hit as high as 2019, and then started to stall and pull back. It whipsawed back and forth for a while until finally closing one point under the breakout level. A topping stick was put in so we will see what the bears can do with it early on next week. There are no excuses for when a topping stick is printed on a failed breakout that would expect at least some form of a pullback. It can anything from nasty to simply putting in a handle for a while longer before trying the breakout once again. It's very unclear for now as today should have been a top. That said, we are in a bull market, thus, never say never about breaking out again. That said, again, there are no excuses here for the bears. They have a failed breakout and a topping stick on top of that, thus, they should get busy early on next week. We shall see what they can muster up.
With the market breaking out and then failing at the close one would think that means things have turned bearish. Not even close. It's really only the very first attempt at breaking out back over the initial 2011 S&P 500 top. First tests fail more often than not, so you shouldn't make the assumption that the market is toast here and things are about to go down violently. A move lower to unwind wouldn't be a bad thing for the bulls as long as they hold the 50-day exponential moving averages on a closing basis. Only when that occurs, and those levels are far away for now, should we start to worry about the bull-run being over for a while. It can take more than two or three tries sometimes, before a market or an individual stock succeeds in making a breakout. One failure is no reason to get bearish unless future price and oscillator action says so. Go easy on assuming the worst here, especially if we do get that pullback early on next week. Nothing has occurred today that says there won't be further attempts to break out in the days and weeks ahead.
Deflation appears to be making its presence felt. We know this due to the recent actions in China and Europe with both country leaders infusing QE programs over the past week or two. This is the reason we can recognize now as to why the world of commodity stocks keep falling day after day. It's also the reason for why we can understand the actions of our Fed Governor regarding rates. She won't raise them because she knows the market won't handle that well, and if she loses the market the economy tanks out. It shows deflation on all levels.The lack of confidence from our banking leaders throughout the world show us all what we're up against in the real world and explains in detail why the SPDR Gold Trust (ARCA:GLD), the iShares Silver Trust (ARCA:SLV) and basically the whole world of commodities are struggling so mightily.
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When bubbles pop, and the real world takes over their actions up or down, it can be nasty for a lot longer than anyone thinks possible. Remember, all bubbles are simply emotional. Folks buying in to a belief that isn't true, and the momentum of that emotional journey can keep things moving higher and higher for a very long time. Then one day, and out of nowhere, the emotional blast leaves as all the traders are in and reality takes over and reality can be harsh. Extremely harsh. A sad lesson taught over and over in this game. Nothing is straight down although these commodities are starting to feel that way. Always rallies but be careful in these instruments.
Summing things up quickly here, there's not much to say. We're well above key support or those key 50-day tests, but we did fail with topping sticks today. Maybe a handle is in store but we shall see. Keep it light.
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