Friday Just One of those Bear-Market Days

Friday is looking more and more as if it were simply one of those bear-market rally days from deeply oversold conditions.


By Jack Steiman

The only problem being it wasn’t that great of an up day. The real powerful, bear-market rally days can be up 2.5% to 3% in a single day. Friday was nice, but far from that type of day thus it seemed as if more upside was likely short-term. Not to be. The market started out down some and tried to fight to green before the bears came in and took it back down. The market stayed down for the better part of the day, but what was most important was how we finished. A nice round of selling in the last hour allowed the market to close basically on the lows with the Dow (NYSEARCA:DIA) down another two-hundred points. Friday gone for the most part. Not the type of action you see when you’re in a bull market. Stocks like Goldman Sachs (GS), which were up huge on Friday gave back more than it gained. In one day as well. The action we’ve been seeing over the past three-plus weeks is purely bearish. The market tries to rally off of oversold or tries to rally off of positive divergences on the short-term, sixty-minute charts, but nothing sustained occurs to the up side.

A small rally, and sometimes even not, but mostly small gains, and then is just disappears in no time. I think by now all of you can recognize all of the changes that have taken place that show the indexes are really no longer in bull-market mode. The market may only be beginning to fall from the all-time S&P 500(NYSEARCA:SPY) 2134 highs. We may not see that level for many, many years to come. Notice, I say may as you never say never in this crazy world of Disneyland, but to me it appears the highs are in for years to come. Loads of rallies along the way with some of those rallies quite strong, but the trend now is becoming clearer to all of us. It’s mostly down with the usual bull-market traders trying to keep it alive. How long before they finally give up is hard to tell. They are a very stubborn group as they have been rewarded for quite some time. For now, your focus should be what today’s market told us. The market isn’t in a very bullish mood. The bears are slowly, but surely, making progress, but the bulls will always be in there fighting, and so you can get caught up emotionally when you shouldn’t be doing so. Be careful, and keep those emotions in check as much as possible. The market has changed its stripes. What you see it truly what you get.

This evening you will see lots of charts related to the banking world. Something is very wrong there and we don’t know what it is quite yet. That said, make no mistake about it folks. Something is very wrong. Study these charts and notice the moves down for just this month alone. Bear-market percentages just for this month. They are melting lower and not at all respecting support levels. Like a hot knife through butter they are melting through key support, which just doesn’t happen in the world of lower P/E’s. If something implodes somewhere around the world, which seems to be the message things can get really bad very fast for the entire stock market so be careful, especially playing anything related to banks or financial’s. I can understand the percentage losses in these stocks if the moves occurred over a six-month period, but we’re talking three weeks here. These were the stocks that took Friday’s rally and made it look non-existent today. No one wants them with the bigger problem being how heavily weighted they are for the indexes.

These are the leaders. When they fail it’s very hard for money to rotate around and keep the market moving upward. So many other sectors are failing, thus, the market overall is finding it harder to rotate. Transports, semiconductors, biotechnology and many more are all failing. We’re close to something nasty, but we’re not there yet, and we still have very compressed oscillators thus a rally can still occur at any time. Maybe Apple Inc. (AAPL) can help the market tomorrow evening when they report their numbers, but time is running out. The bulls are teetering here. They need something special and they need it fast. It’s looking more and more that something nasty is lurking out there in financial land. Time will tell.

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Oil (NYSEARCA:USO) didn’t escape the carnage today. They were so wonderful on Friday, and that had everyone talking up the energy sector. Oil was out of the doldrums only to see larger losses today than what we saw in gains on Friday. This sector has been the absolute leading sector in terms of bearish behavior from a long time ago. Folks are continually trying to catch that all-elusive bottom. It just hasn’t happened yet, and may not for far longer than anyone thought humanly possible. Another area to stay away from although most won’t as any up day gets folks, yes, you guessed it, emotional! The bottom is in. Folks chase such as they did on Friday and then today happens. Wash and repeat. It’s so hard to stay away as most of you want so desperately to catch every single point of upside. The angst when you think you’re missing something is very interesting. The same lessons keep getting taught over and over again. try not to learn to many of them. Support at 1812. Resistance at 1909 short-term.