Jack Steiman is Chief Analyst of SwingTradeOnline.com, where you can find his technical market comments and intraday trade alerts. Jack is a former columnist for TheStreet.com who is renowned for calling major shifts in the market. President of New York-based Visionary Research Group, Jack previously served as Chief Financial Strategist for InvestEd Central and also hosted two daily programs on Business Talk Natikonal Radio. Jack's best-known market call came in calling the market top in October 2007, when he urged his followers to begin shorting the market. Click here to sign up for a free 30-day trial to Jack's service - SwingTradeOnline.com.
There is no way to know exactly what long term affect the news after hours Friday from the Fed will have on the market but the Government knows the market is on the precipice of something very bad and many will say it's no coincidence that the Fed has announced that they will be backing the debt from the basically insolvent mortgage lenders Fnm and Fre. This will protect the bond holders and not allow the mortgages on the books to just go under which would be devastating for the economy. "Treasury Back stop" is how they are titling it. Is this why the market rallied back sp hard late in the day? Did someone know this news is coming. probably yes but there's nothing anyone does about it anyway. Bottom line is this tells the world that Fnm and fre are dead situations and the stocks themselves are crushed in the after hours but the market futures are just exploding. The futures are right back to that magical 1260 number this evening after a close at 1242. The political world can't afford an economic blow up ahead of the election and they are throwing out all the stops to try and prevent a melt down in the stock market which is very close at hand. you have to give them credit for trying I guess. Will it work beyond a quick burst higher? I don't honestly know and we don't know what else they'll try to do to save this market. It's no coincidence folks that this is happening now with the market having just lost critical 1260 support. Extremely interesting times to say the least. Can the fed and the political world work together to stop the market from falling apart? I haven't a clue. No one does. Only the near term action on Monday will give us more clues and insights. What a ride Monday should be.
The market gapped down on a very poor jobs report this morning that was bad mostly on the unemployment number of 6.1% from 5.7% in July. That increase really spooked the markets and the futures tanked and we gapped down and ran right out of the gate. We tapped 1217 Sp and the rally began with the market at extremely oversold levels. After a few attempts to go back lower it seemed the market was intent on hanging in there. Almost surprisingly so. The market closed near the highs and then the after hours hit. Many will say today's test of 1217 was close enough for a full retest of the old lows at 1200. Only time will tell but I suggest you don't get bullish too fast. Internals were not great but that won't matter Monday. The market was very weak when you sum things up today even with the rise off the lows. Again, tonight's news makes that a moot point thus there's nothing to take away from today other than we saw a clear oversold rally. Because the break down was so intense on Thursday this rally back up today was meaningless and had to be expected once we got so oversold. Now all of that has no relevance and we'll just have to see what the news from Fed can do to this market on Monday.
If you're bearish it has to be very annoying to see the Government come in and do things to help prop up the market. Who do the bears have to go for when they need help if the market is melting up? No one of course. I sympathize with the bears but that's the risk in this game. Remember, market almost always go higher overall and many times we can look back at the action from our political leaders or the fed and realize that they have had something to do with many of those strong moves higher. The market is clearly not played on an even playing field and that'll always be the case. Appropriate or not it is what it is. I'm not sure the fed and their actions tonight can save this market. It's hard to believe it can but who knows for sure. Don't count on it but we'll have to watch 1260 very closely on Monday. If it doesn't clear don't be shocked to see the fed and our political leaders try other tactics as again, they know the implications of what took place Thursday with the loss of 1260 Sp.
The one thing to keep in mind Monday as we rally early on is that it won't be that easy to take back 1260. A few points above is not what the market needs. If you're thinking about chasing the gap up, be careful. chasing gap ups in this type of environment won't work most of the time. Let the market send its message only after the market has closed. Things can look good right up until the last moment and just simply fade out. We'll need to be sure the internals are right, etc. All of this is a big if. There are no guarantees the bulls will get the job done even with tonight's mighty efforts by the fed. Again, the Sp is basically at 1260 tonight. Not above, just right on it. Who knows how much of that will hold in to Monday. Maybe it'll be higher. We don't know but chasing the gap up should it hold isn't the smartest way to play. If you do play long keep those stops mighty tight. If we gap up strong but fail as the day goes on then getting very short will be the way to play. Slow and easy. The trend is still lower until proven otherwise.
Jack's selected charts for this week:
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Jack Steiman is a former columnist for TheStreet.com who is renowned for calling major shifts in the market. President of New York-based Visionary Research Group, Jack consults to individuals and companies on stock market analysis and education. He honed his skills as a trading educator in front of live seminar audiences in his role as chief financial strategist for InvestEd Central, and also previously hosted two daily programs, "Market Close Live with Jack Steiman" and "InvestEd Central with Jack Steiman," on Business Talk National Radio.
Jack's best-known market call came in calling the market top in October 2007. He urged followers to begin the shorting the market in November, saving those who followed his advice the huge cost of being lost in the market's steep subsequent decline. He had 94 winning stock market picks of greater than $1 gain in 2007 out of 133 picks -- a greater than 70% winning percentage.
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