You can't have those hold on forever thus the selling that takes place. It does not mean that all is lost despite the increasing bad news on the economic front. The battle will now rage between the 20 day and 50 day exponential moving averages for a while and how that is resolved will tell us if the bull is truly dead or if its just taking some well deserved time off to continue and unwind things to the oversold level on the daily's. If we get oversold on the daily charts and we hold on to the 50's then you have to think things aren't nearly as bad as they looked this week, especially the past few days. On the other hand, if the move up is weak and labored we have to consider the fact that the bull is about to end. It is totally unclear which way it'll break because if you study the daily charts, they are almost oversold now. We are truly at a crossroads here. It'll be no fun for folks if we lose those 50's because that opens the door for another leg down in the bear market and this would have been nothing more than a rally in that bear market. It won't take long to get our answer folks. The battle between the 20's and 50's is not a wide and lose one. It's tight. The Sp 20 is at 1043 with the Sp 50 at 1017. There is also gap at 1017. This is an additional buffer for the bulls but a death knell for this market should it get taken out with force. Patience as we learn the truth.
When studying the divergences, stochastic's and other oscillators on key sectors of this market we see them pointing lower but at least they're getting closer to oversold. The RSI's are somewhat troubling as they are the one oscillator of significance that is not as oversold as the bulls would like. Still in the mid 40's and as we know, not until we hit 30 are we really oversold. Stochastic's alone are not enough to declare a market oversold. You need the RSI to confirm. In other words, there is the necessary room for the bears to seize on things and take this market below those line in the sand 50 day exponential moving averages. Now we often see things pointing down as we do now and suddenly find them turn back up at these levels of unwinding thus there's hope. It's not great as they look now and the red flag should be up in your mind but it's not as if there's no hope for the bulls here. In a true bull market, we often see the RSI's turn back up right where they are now, in the 40's. Not the best looking charts and you should be prepared for the possibilities but don't give up hope, if you're a bull, that these oscillators can turn from right where they are now. In the end, it's all about the Sp holding 1017 while the Nasdaq needs to hold 2025 our key 50 MA Support levels. Please take note that all our the major Indices seen below in charts 1-5 are currently in the process of testing our important 50 MA's. If they hold our bull trend remains in tact. Should they give way in convincing fashion all bets are off. We are at the moment of truth.
Sentiment is not on the side of the bulls here although they're not at levels that necessarily say it's all over. The spread is getting a bit wide amongst the traders but when we study the advisors sentiment, it's quite the opposite with more bears than bulls. Of course the traders matter more than the advisors and the spread isn't too far from 30%. We have not seen extreme readings on either side of the put call world.