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Jack Steiman: Greece Time....Transports/Semis Under Earnings Pressure...Still Nothing Bearish.....

Jack Steiman

Jack Steiman

The long and very boring six month base to nowhere continues. There is hope, however, that it's about to end. Hope, no guarantee and here's the reason for the hope. First lets once again understand the two key levels that matter bigger picture for the market. Sp 2040 is powerful, triple bottom support. There's also the 200 day exponential just above by ten points. 2134 is the very powerful double top. We recently tested just below 2130. 2040 to 2134 is nearly five percent. That's a very huge channel to trade through when you consider it's not as simple as going to the top and then to the bottom. Not at all. It's more about meandering anywhere in that range. It can trade in the middle top or bottom at any time for no particular reason. Moving to one level does not and has not guaranteed a move back to some other level. Very haphazard.  See SP 500 Daily below:

If Greece should somehow be allowed to default and to stay defaulted for many days, it's hard to imagine we don't just blow right through 2040 on the down side. Certainly there's a good chance for that ending. Conversely, if there's a strong settlement before the deadline of June 30th the market has a real chance to blast through 2134. Don't get negatively caught up in the recent selling. Nothing bearish has taken place. Just normal selling off the top and some recent negative sixty minute divergences. That's mostly played out. Now it's all about Greece over the next few days. Again, June 30th the deadline. It will more than interesting and hopefully the catalyst will be in for either a break out or a break down from this annoying, seemingly never ending six month base.  The Nasdaq which tested our all time high of 5,132 going back to the year 2000 pulled back off that Resistance area early in the week and fell back into our base as seen Daily chart below:

Last night we received an earnings report from semiconductor stock MU. A leading stock that had recently found hard times with regards to price. The report was a disaster. When a leader reports a really bad number and guidance the market takes notice. The selling that occurred was brutal. Down over 17%. The semiconductor stocks in concert took a massive hit lower causing some technical damage to the sector chart down about 3.5% for the week. Not good if you're a bull since this is one of the leading economic sectors to lead the overall market. The Sox lost both the twenty and fifty day exponential moving averages today with a full candle. The move below those moving averages was pretty powerful as well. Not good at all. A small breach isn't bad but a strong move below opens everyone's eyes to the potential for further down side action. Of course, the right news out of Greece would be a powerful medicinal cure on some level but if that doesn't happen the damage is real and would likely keep the bulls away for some time, allowing for prices to fall further still. The market doesn't need another leading economic sector to fall in to bear mode. The transports are already there. They are in bear market mode for sure and it has had a heavy weighting on the overall market. The main reason why the Sp and Dow have lagged the Nasdaq, small caps and mid caps. If we have both of these sectors in a bear market, getting the breakout above 2134 will be nearly, but not completely, impossible. Again, sad as it is to say, Greece will play a major role in the days ahead so buyers beware. Shorts beware as well. That said, with regards to those two key sectors, the onus is on the bulls to prevent the damage from worsening.

If we study the recent selling we can see some nice unwinding on all time frames with regards to the oscillators. In addition, none of the key oscillators are flashing a bearish signal. They're moving along properly with price. For now anyway. When trying to understand selling episodes it's good to see how the price/oscillator tandem are behaving. Whether one is diverging from the other or whether they're moving in concert. For now we're fine if you're a bull. That would change rapidly if we lost 2040 on the Sp on a closing basis with force. Besides Greece we still have bad looking weekly and monthly index charts and once again we have froth problems so the market can correct at any time if it wants, regardless of Greece. That said, it's likely to break out, at least temporarily, if the Greece situation is fixed timely. Adapt and adjust as the market dictates. For now things aren't at all bearish but our attention is one hundred percent focused on Greece between now and the 30th of June and possibly beyond. Let's hope for resolution quickly but be prepared for the worst should it occur. 

Jack Steiman

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