Market Holds On..Additional Leaders Losing Support...

Jack Steiman from SwingTradeOnline.com at 12/04/09

The market had yet another reversal off this S&P 500 1113-117 area. Nominal new highs, daily it seems. but no new gap up and runs that blast the shorts out of the water. This level is proving too difficult for the bulls to get through. The bears are able to attack it with little effort in holding it at bay. Roughly four failures now. At some point there are enough failures and the market has to reverse and head lower with some force for a while. No guarantee's but with today's late reversal there seems to be a message being sent that says extreme caution is now the way to proceed. The only thing holding me back from getting short-term more bearish is the huge Jobs Report tomorrow morning pre-market, and I want to see how a good report or a bad one gets handled. That will tell me all I need to know for sure. If a good one is handled with a gap and reversal then it's clear the market has topped out short-term and some shorts, when appropriate, will be the way to play. Do remember, however, that there's nothing bearish going on officially until the bears can remove those 50-day exponential moving averages with some force on larger, increasing volume. Until then, it's all noise and nothing else, no matter how bad it feels when we reverse and sell off.

The market gapped up a bit today on good overall performances overseas. Asia rocked and Europe followed through, although, not as well as Asia. Up was still up and with everyone green, so were we, especially after the Jobless Claims Report came in showing improvement.
The market hung in and made another new high but barely so. This is when the bull’s least favorite word, churning, began to make itself clear to all that we weren't going to break out. As we approached the last 20 minutes, we heard some news from some of our leaders in the Government about a tax proposal on all transactions in the market.

See today’s charts at SwingTradeOnline: SPX (S&P 500 Large Cap Daily), WLSH (Wilshire 5000 Weekly), INDU (Dow Daily), COMPQ (Nasdaq Daily), OSX (Oil Services).

This would, for all intents and purposes, end the stock market as we know it. It has almost no chance for passage. but it was put out there again and this didn't help the bullish case. If all of you want to know what a market crash looks like, watch the day this gets passed. Volume daily will be cut by probably 70% or more and no buyers would be there to keep the averages up.
Let’s hope this doesn't get passed, but in a way, Wall Street deserves it if it does. The greed is out of control. That's another story for another time. Bottom line is the market fell on its face in those last 20 minutes led by the financials. Poor action across the board ahead of tomorrow's big jobs number. Oh what an interesting day tomorrow will be. A big gap down that runs puts the bulls on the hot seat. Worse yet for the bulls, would be a gap up and reversal red.

We are starting to see a much larger group of old leaders break down and from all over the market. Few sectors are being left out of that party. The financials are broken and now so are the oils as you'll see in one of the charts tonight. All these break downs are coming out of very extended up patterns that were starting to flash negative divergences. There had been other such divergences throughout this process, but they were shaken off when they occurred at lower levels of the MACD cycle. These are taking place now, at the top, and the job is much harder now for these stocks to shake them off. We're seeing trend lines broken. Wedges taken out. Even losses of those 50-day exponential moving averages on such leaders such as Goldman Sachs Group (GS). Not the best of behavior for sure. Retail got annihilated today on a warning from ARO. Aeropostale Inc. (ARO), Abercrombie & Fitch Co. (ANF), The Children’s Place Retail Store (PLCE), and others were taken out and shot to the average tune of 10%. That's more than just your run of the mill pull back.

The divergences are kicking in now. This can be how markets top. Or not!! It could just mean we need to wait a while longer while these oscillators unwind and the divergences can be worked off. A harder pullback, should it occur, does not mean market death for sure. It could, but definitely does not mean it will be the end of this bull run. If we do lose the 50-day exponential moving averages across all the major indexes, and do so with force, the market is in deep trouble. Only then, will I believe that this bull run is over. Not a moment before.

Let me update for you those 50-day exponential moving averages that separate bull from bear.
Dow is at 10.051 or some 3% away (300 points). S&P 500 is at 1075 or 25 points away or 2.5%. Lastly, the Nasdaq is at 2125 or 48 points away or a little over 2%. The Nasdaq has been lagging overall and that's not the best action. It's always best when beta leads or higher risk if you will, and that's not the case here at the top these past few weeks. A bit of a red flag.
There are other red flags I have talked about day after day and they are still alive and kicking.
Tomorrow's Jobs Report will be very telling in terms of the markets short-term future. All eyes are watching one hour before the market opens for trading.