Jack Steiman is Chief Analyst of SwingTradeOnline.com, where you can find his technical market comments and intraday trade alerts (click for 21-day free trial).
Sometimes, we all get tired, and we don't want to do anything. We just don't have any energy. We just want to sleep. That's the market right now. It just doesn't want to do very much other than whipsaw around. It drives everyone crazy wondering what is going on, and more importantly, it keeps everyone in the dark about what's coming down the road. The bulls have been unable to get this market back up through the declining 20- and 50-day exponential moving averages. We will discuss more on those levels later in this letter.
The bears have been unable thus far to remove that massive support at S&P 500 1340. Double digit tails in the past on both sides of that number. They took it to 1343, but that's the best they could do. So now the market is capped between 1343 and 1377, with neither side getting much done as the volatility seems to be going away. In this type of environment, that should not come as a shock as neither side is in real control, although we are in the unwinding, or agnostic, phase of this market. The market still has that heavy feel to it short-term, so a break of 1343/1340 would come as no surprise, which would then take us down to that 1325/1313 confluence of support, with 1313 being the critical 200-day exponential moving average. If we start to lose 1313 with force, then things would start getting iffy for the bulls bigger picture.
Friday had all the makings of this market getting ready to lose 1343 when news hit on Thursday that totally embarrassed JPMorgan Chase & Co. (JPM). One of its traders lost 2 billion dollars in a single trade. This will hurt their bottom line for the quarter, thus, the stock, basically, put out an earnings warning to the street. The stock got clobbered on the news on Friday morning, and stayed down big time all day. When a stock like JPMorgan Chase gets hit to the tune of roughly 10%, it is obviously something bad took place, besides the obvious embarrassment that went along with that trade. The futures tanked out on that news, as the banks took the biggest hit. This assured that the S&P 500 would under-perform the Nasdaq 100, and that's exactly what took place. Most of the big banks live in the S&P 500, and are heavily weighted. The trigger was set for the breakdown, but it never came.
The market bounced from the worst levels right out of the gate. All of the indices actually went green as the day wore on. In the end, when the final bell rang, it was a quiet day, with the NDX, by far, the best index in terms of performance. It was nothing to get excited about, but nothing terrible when you think about how JPMorgan Chase got handled technically. It wasn't pretty. It lost all critical support, including the 38.80 level, which was its 200-day exponential moving average. The 20-day is also now crossing below the 50-day exponential moving average. and that too is never good news for a stock.
So, although the market held up technically, JPMorgan Chase did not. It is a damaged stock for sure at this moment in time. The bulls need to act fast to get this back over 38.80, or things will deteriorate technically as time moves along. So yes, the market held up once again in to the teeth of very bad news, but the red flags abound. For now, the market seems tired on both sides of the ledger. Bulls and bears, alike, seem to be in need of an extended vacation.
Many stocks out there, leading stocks, are in the same tired malaise as the market indexes are. Not a lot of good action, but nothing terrible either. The big leaders are simply unwinding overbought conditions that existed for as long as three months. Some overbought conditions were historic, with RSI's over 70 for three months, while at times, approaching 90 RSI's, and staying there for extended periods. Apple Inc. (AAPL), Priceline.com (PCLN), and a host of other stocks are now paying the price for those extreme levels of overbought, and if they continue to act in a malaise, there is little to no hope of this market ever breaking above 1422 in the near- to medium-term, if not the long-term.
They need to start preforming better just to get the Nasdaq 100 to break out above the lost 20-day exponential moving average at 2994. That would equate to 1377 on the S&P 500. Only when those lost key moving averages get taken back can they begin to think about going back up to the old highs at 1422. Things don't look good at all for that type of market action. The only thing that could help there is extreme actions by Fed Bernanke, and even if he did such actions, it's unlikely the market would race up that high as that's now mostly built into prices. Plus, there are so many different levels of resistance from moving averages to huge open gaps. The leading stocks just aren't pointing to much upside, overall, in the weeks ahead. Always rallies, but don't expect too much folks.
The Fed is on watch again. We are seeing an ever increasing amount of poor economic reports these days. There is one after the other as they roll in on an almost daily basis. The biggest-of-the-big are not coming in all that good, therefore, folks are turning their attention and acting like children again, wanting more free cash in order to try to stimulate the economy. The same behavior hasn't worked twice now, but why not try again, they say. Those who don't care about the ever-increasing debt simply want free cash injected. Not the best way to go about things, but it seems as though the Fed is getting closer to pulling the trigger on yet another quantitative-easing program. It would hurt us terribly bigger picture, but surely help ease those who are on edge for the near-term.
That includes our President, who wants as much assistance as possible in an election year. No one said politics are a good thing. It seems to hurt more than help in all phases of our lives. However, it is an election year, and that means very little will be left on the table, with regards to trying to stimulate this economy. Fair, or not, it is what it is. You are likely to hear more, and more, about further easing from the Fed, as the economic reports deteriorate. Based on what we've seen lately, that's likely to be the case.
The market is tenuous, folks. There is nothing good out there, to be honest, and nothing bad, either. The bull-bear battle is on between 1343/1340 and 1377. It's best to be heavily in cash, and remain that way for now, until we get more technical evidence as to what is mostly likely on deck. If we lose 1340, we will see between 1325 and 1313. If we break above 1377, we will likely try to go back to the old highs up at 1422. Take it slow and very easy here, folks.
To view Jack's selected charts for the week, please login to SwingTradeOnline.com.
We want to hear from you! Did you love this article? Hate it? Tell us what you want to see on Investors Alley - click here.
SwingTradeOnline is dedicated to providing institutional-quality technical analysis of stocks and indices for traders with a several day to several week time horizon. SwingTradeOnline's flagship subscription service features technical analyst Jack Steiman and his intraday journal of technical market analysis, stock picks, and trading alerts for swing traders. Click here to sign up for a free 21-day trial.
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.
"Jack Steiman is excellent on short- to intermediate term timing for swing trades. For people looking for short-term swing trades both long and short as well as market direction, there is nobody better than Jack on the Web," says Al Slayton, Los Angeles-based financial advisor and subscriber.