Post by maxi on Apr 13, 2012 18:03:09 GMT -5
JACK'S WRAP, Friday April 13, 2012
Whip It Good....
by Jack Steiman, SwingTradeOnline.com
Those famous words from the music world is what we'll all be dealing with for some time to come. Most view it as a negative, but the truth is, without question, it's a positive. Bulls want everyone to get bearish. And what's the easiest way to accomplish that? Easy, my friends. Let the market stop going up every day, throw in some real nasty days, and there's the magic potion for some real nasty emotions flying about. That's how markets unwind their bullish behaviors. Enough down side thrown in, with some real bad days, and the world is falling apart in front of our eyes. The reason is what I always talk about....fear. Fear is a beast. Always has been. Always will be. It grabs you by the brain, twist your gut, and before you know it, you're in the fear camp, thinking the market is going to zero. The headache for the bulls is that they get disgruntled quite easily. They think the market is done, and turned bearish, which means a little more selling along the way. A catch 22, if you will.
Fear turns bulls to bears, and that brings the market down. But there's a load of cash sitting on those sidelines, and when things get low enough, that cash comes flying in, and up we go again. The bulls who turned bearish, but want to be bullish once again, become bulls, and chase up. Then the upside is back in vogue. Whipsaw, my friends. Lots of whipsaw to be had by all. It's the market's friend, not its enemy. But if you get too involved emotionally, it will become your worst nightmare. Realize what's taking place. Don't give into the bad days. Use weakness as your friend, and things will be fine bigger picture, even if it's a struggle for a while in the beginning.
Sentiment is sure to have fallen again this week, so it's likely the bull-bear spread is probably no worse that 25% now, if not a drop lower. I don't follow, or give much energy to, the AAII survey, but it's at an extreme, now, of too many bears and very few bulls. It didn't take long to get the bears rocking in. It never does. Life is tough for most, and the fear of a bear does the trick, even when no bear truly exists. So buckle up, and be ready for some type of extended period of not so much fun for all of you. However, bigger picture, recognize nothing bad is occurring. One day at a time. If you don't like whipsaw action, you should stay in cash. If you play, don't get knocked out too easily. Give yourself some room.
Earnings season is upon us, and so far, it's been a mixed message. Nothing really bad, although, some stocks have taken quite a hit to the down side. Reporting at the wrong time in a given market phase can be bad for those holding long into reports. Alcoa, Inc. (AA) started off great. Some others have been fine, while others not so great, although really not bad. JPMorgan Chase & Co. (JPM) was good overall, but far from perfect, and got hit some today. Same with Google, Inc. (GOOG) and Wells Fargo & Co. (WFC). Banks haven't been wonderful, but part of that is because they've run up and needed to sell some.
Google saw a down-tick in prices per click. All other phases of the business were good, but again, they, too, were up quite a bit ahead of their report and pulled back hard. On a bullish note, it started out flat, so there's basically no big gap down in the pattern, although it will need time to heal up. The market will be reacting to every report on both earnings and the economy. One good report equals a good day. One bad report equals a bad day.
All part of that word, again known as whipsaw. The next few weeks, especially into early May will see the heavy punchers come out with their last quarterly numbers. I think the overall the numbers are pretty decent. The key will be future guidance, and not what took place yesterday. It should be fine overall. The bigger question will be those economic reports, but that's whipsawed around as well these days. Earnings are upon us, and, thus, buckle up for the good and the bad.
Stocks, like Apple Inc. (AAPL), which are on a high pole, and showing some negative divergences, are taking a hit now, and there's nothing wrong with that. The market has shown the ability to hold up even when a leader such as Apple finally decides to unwind from ridiculously overbought conditions. Every stock needs to rest. Even the mighty Apple. It could fall decently from here. There's support at 590 gap, and then another gap at 580, with the 50-day exponential moving average at 560. A move that low would actually be quite healthy, but who knows if that's in the cards, or not.
The market is continuing to rotate as its mode of keeping the stock market from falling too hard. If rotation totally stopped, that would mean a move to 1340 is possible on the S&P 500, but for now, there has been enough to keep the 1360/1370 area as support. If we did get to 1340, that wouldn't be a bad thing, especially if that's about all of the selling off the 1422 top on the S&P 500. When Apple unwinds, it gives the osciollators on the NDX and PowerShares QQQ (QQQ) a chance to fall, which they desperately need. So, I think, that's a real good thing bigger picture for the market. Rotation has been ongoing for quite a long time now, even as we deal with the pause/correction phase of this bull market. It shows health underneath the selling.
The S&P 500 may not be finished with making the base it'll use to create the whipsaw we're currently experiencing. 1340 is strong, powerful support. 1422 is massive resistance. Let's see if the bulls can hold support at the 1360 area. But there should be no shock if we do go as low as 1340 on the S&P 500. We have begun to very nicely unwind all the index daily charts, with many stochastic's near oversold. Many have crossed up as well. This usually means most of the selling has already occurred off the top. Again, 1340 is still a possibility. On any stronger move lower, there will also be strong, positive divergences setting up on the 60-minute short-term charts. Again, nothing will be easy, but that doesn't mean market death is with us. Just a more difficult stage is at hand, and could be with us for quite some time to come, so be prepared.
Peace,
Jack