The long-term daily-chart uptrend line has been broken for the first time on a closing basis in quite a long time. It felt as if the bulls would never give it up. Just last week we tested 2045 where the trend lived at that time. It looked hopeless for the bulls, but they pulled the rabbit out of their hats yet one more time. That luck ran out on them today. Give them credit for trying. They gave it all they had, but failed slightly. Many close tests back up, but each time that test was knocked down by the ever braver bears. We have learned over time never to count the bulls out, and that applies to this moment as the Fed could always try to come up with something, or they could report the jobs number on good Friday just the way they think the bulls want to hear it.
That said, you can't ignore the slight breakdown for what it is. A trend line loss that needs to be, at the very least, fully respected for what it could bring to the short-term indexes. It can get very ugly if the bulls can't find the right ingredients on that critical jobs report on Friday. It is do or die time for sure for the bull market short-term. That doesn't mean a bear market is here, but it could mean quite a lull before things get good again. Interesting times for sure. If we don't recover today's loss soon we could see the bears take full control of this market, and things could get ugly so again, it's now or never for the bulls. Recover the lost trend line now or watch this market fade out with lower prices for at least the short-term. Good news is that the futures are up decently after hours thus hope we can take back the lost trend line tomorrow.
If you want fear you got it. I'm not following froth any longer, but many are asking me to keep them in the loop on the weekly readings and since today is a Wednesday I will update as you all requested. The number remains bearish at 40% on the bull-bear spread. If the market can give it up for a few weeks you'll finally get below the dreaded 30% level the bulls hate to see us above. It's been roughly thirteen months of above 30% save for two weeks last October when the market had its biggest 9.9% correction. The market needs to spend many months below 30%, but who knows if that's in the cards, nor do I know that it matters based on daily actions from the Fed. Do keep in mind that fear requires action while complacency does not, thus, the levels can fall very fast if the market instills enough fear for many weeks or maybe even months. A reading in the teens someday would do wonders for froth.
That can only happen if the Fed doesn't interfere. I don't think she'll do another QE program until the market really starts to get smoked, meaning Dow 2000 off the top, or thereabouts. 10%, or so, off the top and I guess you'll start to hear whispers of the next QE program. Based on our weak economy we all know it doesn't work, but you'll hear about it anyway since the next announcement of a QE program is not really intended to work for the economy but to work for the stock market. It's all about the market since that's the real economy. We're a long way away from that, but just food for thought.
S&P 500 2044 is support, or horizontal price, followed by gap at 2022. Below that it gets interesting. 2006, and then 1980 are horizontal levels as well. If we don't recover the trend line soon any price below is quite possible. If it doesn’t recover and we start visiting some of these levels, then the down trend would be firmly established, and, thus, the market would be extremely risky for new longs. When market trends change you need to change with them. If you don't you feel more pain than you need to.
Not necessary, so don't put yourself through that. Let's be blunt folks, never count out the bulls. They have more tricks than you can imagine, but at the very least, I would urge you all to have respect for what may be taking place. Just respect. Nothing more is necessary. Playing a little bit lighter than you're used to doing would at least be a good start. Always do what feels right to you, of course, but again, respect is critical here. Price action is not bullish for the moment. We shall see if the bulls can pull out more magic as they normally do, especially when things get tough, but for now the market isn't very good technically, thus, adjust your thinking at least somewhat.