Nothing Bearish Here....
Jack Steiman from SwingTradeOnline.com at 12/03/09
It is stunning to me to listen to so many who have gotten bearish here. Any selling, especially in a leading stock such as Apple Inc. (AAPL) over the past two days, gets the bears rocking and coming out of the closets. Look, I know there are no guarantee's here as the market could fold over at any time without warning, but I just don't see anything that says things are deteriorating. Not at all. Look at today's advance-decline line on a flat day.
Very strong across the board with advancers easily overwhelming the decliners. I hear a lot about this part of the market in that the advancers are losing sway over decliners. I don't know, I just don't see that taking place here. I follow the advance-decline line and it seems to be holding well and some evidence of that is how some leaders have fallen off quite a bit yet the markets are holding up near their highs. Leaders are taking a well needed rest while the rest of the market does the dirty work in keeping the bullish case alive.
See today’s charts at SwingTradeOnline: NYA (NYSE Composite), MID (S&P 400 Mid Cap), COMPQ (Nasdaq Daily Charts), SPX (S&P 500 Large Cap), Utility Select Sector SPDR (XLU).
Today we saw a flat open followed by some good buyers that took the S&P 500 to a new high at 1115. A nominal new high and thus it's meaningless. We got overbought at that new high on the 60-minute time frame charts and thus we saw the sellers come in and take things down with Apple Inc. leading the way. It can test down to the mid 193's and test the 50-day exponential moving average, which it hasn't tested in quite some time and there's nothing wrong with that type of pull back. Normal to say the least. We started to turn nicely red on the Dow and S&P 500 only to see those index come back for roughly a flat day at the close, but with the Nasdaq decently green and leading, which is just what you want to see. Nothing great today as the bulls failed on the breakout again but nothing in the way of this being a bearish day by any means, regardless of what you may be hearing to the contrary.
There are handles setting up all over these index charts. Bases are long in the tooth but who cares ultimately. The longer the base the better as things unwind. For instance, let's go back to Apple Inc. (AAPL) and Goldman Sachs Group (GS), two massive leaders of this market. Notice how low their stochastics have gotten on their daily charts. Look at how far down compressed the MACD is getting on GS. Can these stocks fall another 3-5$? Sure, but I'll bet not much more than that from here. Massive positive divergences will set up on GS on any move towards or below 163. Also, try keeping AAPL down too long once it has its daily stochastics below 10, especially 5. Handles are good for two things. Setting the market up to unwind things, which is good, and to drive everyone nuts. The whipsaw and head fakes can drive you off the wall with emotions. That's the nature of the beast and what makes this the hardest game in the world. In case you haven't realized it, markets are in handles more than any other pattern. That's what makes it so tough. It drives doubt in to the heads of both bulls and bears alike. Mission accomplished in this three-month base.
So those key support levels or those 50-day exponential moving averages keep holding up. It seems too many that we don't have to lose them to be in a bearish scenario. I beg to differ. I think it's absolutely 100% essential for the market to lose those 50's before any meaningful selling can ensue. Big money watches those levels every day and will stay more aggressive-to-weakness as long as we're above, but not too far above, which is where we are now. When markets get too far above, it's time to reign it in, but in this case, we have a market consolidating above the rising 50's, which is certainly more of a favorable situation for equities. I know I remind all of you about this often, but the 50's are the key, and all you should be worrying about. The trend remains higher until they're gone. Period!
The range continues uninterrupted. Basically 1085 S&P 500 to today's high at 1115 S&P 500. The range is getting narrower meaning this consolidation is likely getting closer to resolution. Doesn't mean tomorrow, but the narrower the range, the sooner a trend line break will come. We will continue to play the long side of this market until there's enough evidence to suggest playing otherwise.
