So the bears had the bulls dead in the water a few days back. The long-term, up-trend line at 1950 had been taken out with some force, down to 1926 intraday on Thursday. This was it. This was their time. Bulls finally knocked out cold. Well, nice thought anyway!
The index closed at 1946 that day followed by another close at 1946 on Friday. Right after that double 1946 closing bottom the market blasted back through 1950, and so here we are again. No where.
The bears, to say the least, are fighting harder. The indexes are back testing, and for now, at least, failing at the 20- and 50-day exponential moving averages. A change of trend, perhaps, but the selling isn't yet intense enough to say with certainty that this failure is etched in stone in the days ahead.
There was no thrust lower on Monday off the back test, which is what you want to see if you're a bear. Maybe, if not likely, we fall a bit early tomorrow, but start to recover before the day is over.
Earnings season is upon us soon, and when markets are teetering on the brink of something positive or negative, the earnings reports from key companies can be the spark that ignites the move. So we'll be watching carefully.
You would think that with all the other headaches the market seems to be taking on -- from froth to bad weekly and monthly charts -- the bears wouldn't need the excuse of earnings being not so great. But quite often, since the trend has been so positive overall, you need a catalyst that hasn't been there, and clearly earnings can turn the tide very quickly.
The majority of companies haven't lowered too badly, and with economic reports swinging wildly from bad to good and then good to bad, it's really hard, if not impossible, to determine what we'll actually hear from those reports. We'll know soon enough, but always stay alert to what these companies have to say about forward guidance. The market will likely decide how it wants to react once guidance is given. It's not about what took place, but about what's going to take place in the future versus previous expectations. Since the market seems to be going back and forth to no where, maybe earnings will be the final catalyst to a sustainable move one way or the other. We can only hope.
In closing, we're still only focused big-picture on S&P 500 1950, or that key trend line at 2019, the old high. All action in between those levels on a closing basis, and with force, is merely noise to be ignored, with regards to a sustainable move. We need the break and the close below, and yes, we need it with force and preferably with volume.
Jack Steiman
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