Market At Mid Range..Some Leaders Breaking...

Jack Steiman from SwingTradeOnline.com at 12/18/09

But nothing is broken as those that are breaking can come right back up. It isn't great to see Apple Inc. (AAPL) lose the 50-day exponential moving average for the second time in short order. It lost it and surged back through with an eight point up day but that has now been largely lost, and we are again below on this massively important leader. It's only by a little more than a dollar (50's at 193.80) and it wouldn't take much for AAPL to recapture this critical level but it's still not great to see it go away once again. In bull markets that may be topping out, you look for small subtle signs that say there may be trouble ahead. AAPL losing the 50's is certainly at least a red flag that has to be respected.

Goldman Sachs (GS) long ago lost its 50's and every time it makes a move back up to test that lost level, it finds big sellers and down she goes. It's often said that as GS and AAPL go, so goes the market. We've lost one in GS long ago but the market has held up. If AAPL continues to fall, can the market withstand that pressure? I would think it's doubtful for too long. AAPL has so many other stocks it affects that they too would likely take a huge hit and thus send the market lower in all likelihood. All of that said, here we are at the mid point of the 1085/1115-1119 range. So when one observes today's move down, all we have is a market that's doing nothing but whipsawing around. Nothing bearish (red flags do exist) and nothing bullish as the bears are easily defending the 1115 area on the S&P 500.

See today’s charts at SwingTradeOnline: SPX (S&P 500 Large Cap Index Weekly), SPX (S&P 500 Large Cap Index Daily), COMP (Nasdaq Composite Daily), RUT (Russell 2000 Small Cap Daily), INDU (Dow Industrial Average Daily), iShares MSCI Brazil Index (EWZ) Brazil ETF EWZ.

One stock that caught my attention today was JP Morgan (JPM), a major financial bank leader. The stock had lost the 50-day exponential moving average one month ago. It has ridden mostly lateral within an existing down trend just below those 50's until today when it printed a full red candle and fell well below those 50's now at 42.42 with a close at 40.27. Exactly what you don't want to or normally do see in an up trend. The 50's get taken back but not this stock today and not the sector itself which is failing more and more it seems each day.

Citigroup (C) priced its secondary at 3.15 when it was expected to be 3.50. The stock tanked on this news. Bad news is being treated as such when it comes to the world of the financials. Basically every single financial stock is now trading below their 50-day exponential moving averages and that is not good news. They are getting further and further away from being taken back. With new gap downs, such as we saw today, that makes the journey back up that much more difficult. Bank of America Corp. (BAC) and others all went the wrong way today. Another break down in the pattern out of a bear flag. If the market is to break higher for one final leg up, it looks like it'll have to be a grind as the financials don't seem to want any part of it.

Another disturbing event today was the action from FedEx Corp. (FDX), which had recently raised guidance. The stock blasted higher on that news, taking the transports much higher with it. Today, they actually came out with their results officially and get smoked down. What happened in such a short period of time to make things so much more bleak? Hard to know but very poor action in this transport leader. It is heavily weighted and always affects another huge leader, United Parcel Service (UPS). FDX was slaughtered on massive volume making its future action poor at best. The gap will now be a wall of resistance on any attempted rally back up. It's in the 84's. Any move back up to 87 will be hard from there. Nothing good there. Things are what they are and we have to respect what the market does with these individual stocks. The leaders always need to be carefully watched.

How about some positive action. After hours we saw awesome moves higher on earnings from Research In Motion (RIMM) (over $7) and Oracle Corp. (ORCL) (over 4%). This is what the market needs to maintain a bid over the longer term. Solid earnings from big caps. RIMM disappointed badly on their last report and wisely guided down. Very smart. Throw the towel in knowing it's only up from there. The stock set the bar low and beat big time. ORCL did the same and if these two stocks don't print black candles tomorrow, that bodes well for technology. That sector is off to a great start and we all know by now that beta needs to lead thus it's coming in good in just the right place. Tomorrow is a big day for these two giants. They'll be watched carefully for sure.

The other real positive of this market is undeniably the fact that AAPL is not very good these days. GS is terrible. Financials in general stink. New leaders seem to go away every day and yet we're right in the middle of the range. That's pretty awesome. The bears have so much ammunition and yet they can do nothing with it. It is possible things will catch up to this market thus there's no reason to be celebrating the negative side of things, but it's great that the market won't break.

Bend yes, but not break.

For now!