Jack's Wrap is available to members on Monday, Wednesday & Friday evenings, with one article per week available to non-members. Members please login and see "Jack's Wrap" in the navigation menu towards the top of the page.

Jack's Wrap - Market Staying Overbought...

Monday February 13th 2012
Market Staying Overbought...
by Jack Steiman www.SwingTradeOnline.com

That's not necessarily good news as it's the second move back above 70 RSI on all the major index daily charts. It would have been, and would still be, a good thing if we sold harder in order to fully unwind those nasty overbought momentum oscillators. but for the moment, the bulls refuse to give in. The RSI's, all back over 70, with the Nasdaq heading towards 80, where it fell hard last time. The risk for new plays doing well is poor here, even if we stay overbought a bit longer. You have to be very nimble, if you're going to put new money to work here. At any moment in time, the market could snap lower.

We started out higher, once againtoday, based on news out of Greece, where the final plans were put into place, meaning a lot of very unhappy citizens as massive austerity is now the game plan. Without it, Greece would fold over and go belly up. No choice, but that's what the market wanted -- a hard-line stance by its Government. Mission accomplished. So, we closed higher, once again, as we grind our way up into very overbought conditions. We need to see a true reversal stick, before we can say the move is over, thus, for now, we may try to go higher, still, to my hoped for target of 1370 on the S&P 500. May not get there.

When you're in a more bullish phase of the market, such as we are in now, you want to see a reversal stick that says the move is over. That usually occurs on a gap up that fails as the day moves along on increasing volume to some degree. It tells you, the sellers have finally caught up to the buyers. A massive black candle, or worse yet, a red candle, once the gap up has taken place at the open. It shows true exhaustion. The complacency is here to some degree as the market is getting bought up on all dips, which shows a real desire to just get me in. Folks want in who have missed the run.

Those who were bearish, or on the fence, can no longer handle the upside happening without them, so they're the ones now holding up the market. That will stop at some point, and those who are the last in will be the ones who take the hit. The market will need more despair in time, so now we wait for the right down stick. Not just any down stick, of course. Just because we have a down day does not mean the market is done trying to go higher. It needs to be a gap up reversal that fails hard on bigger volume. That will most likely be the ticket to tell us the market is ready for some deeper selling to unwind those very, overbought conditions.

There are many different sites that give out information regarding levels of complacency. You can see it somewhat in just looking at those daily oscillators, and how overbought they get, but you can also use various different sites to fill you in on just how high the levels of complacency are. The bull-bears spread I use for Schaefer's, tells us that two weeks ago we rose a full 4% in the spread. When we get the numbers this week, it'll probably be up another 3-4%, making that roughly 8% in just two weeks.

The numbers are ramping up fast. You don't want to see the numbers rise too fast as it shows fear is leaving, and when fear leaves, markets snap down. It can be a temporary snap-down that only causes a 5-85 pullback, but you don't want to be in the market too deeply when that takes place. At least not into that many plays. Nowhere near 100% involved, hopefully. The complacency is definitely ramping up rather quickly, thus, you know a hard selling episode will take place, but again, you want to see the right reversal stick at the top. Just be aware that emotions are getting a bit euphoric here, and that will have to be taken down with some disappointing action at some point fairly soon.

We all know by now that the S&P 500 has massive support very close together. 1326 is the 20-day exponential moving average, with 1315 the long- term down-trend line breakout level. Strong support, less than one percent apart, is good for the bulls. Below 1315 is not good, but there is strong support horizontally at 1292, and that is joined by the 50-day exponential moving average at 1293. Two areas of massive support only one-point apart.

Losing 1315 is bad. Losing 1292 is a disaster for the bulls. Losing the down-trend line, along with the 20- and 50-day exponential moving averages, would be a bears dream. In a very healthy environment, the market should be able to hold on to 1315. We shall see when the selling finally kicks in. For now, we use good weakness to buy again. The bull should have a ways to go, but the short term is going to be far more difficult for sustainable upside action.



Sign up for a
Free 15-Day Trial!
  • Jack's Intraday Swing Trade Alerts with
    Action-Oriented Trading Advice
  • Detailed Guidance for each Trading Idea & Live
    Interaction w/ Jack
  • Technical Chart Analysis of both Stocks & Indices
  • Market Timing from a Pro who called the Market Top in
    October 2007 & Bottom in March 2009
  • Live Chat Room, Audio Q&A ... and Much, Much More!
Join Now!
Enjoy Jack's weekly market technical analysis
FREE by signing up below.
We respect your email privacy.


“As a 7 year subscriber to your service, I was never more in control of my portfolio than when I started with you. I took the course, listened to most of the chats and it has been a wonderful education all these years. All the improvements you've made to the site are terrific. My investments, thanks solely to you and this service, have generated great returns while managing the risk. To me, that's the name of the game. I can't imagine navigating these past years without you so many, many thanks.”
"HSowel" - Trading Room2015-08-10
“I started with the trading room... and couldn't be more Happier!! I've been reading Jack's Wrap for about 3 years and now wish I was involved sooner!! You do an outstanding job with both your written and verbal commentaries! I really look forward to the daily chats and the Wraps.”
"MarcRas" - Trading Room2014-06-03
“I appreciate your mails more than you can ever know..over the years you have given me a feeling of understanding of something I truly wanted to understand..........from the old AOL chat rooms ( we loved it when you popped in ) thru today you remain the best of the best at teaching us old dog's how to survive these markets.........from the bottom of my heart I thank you for what you do and the way you do it”
Billy Elmore Grand Bay, AL2013-01-03
“Jack was one of the few that warned us of a downturn that happened a week or so ago and he's correct again. He's one of the most important financial advisers to listen and pay heed to regarding markets. When Jack speaks, I listen! I wish others were as honest as Jack. I've gotten numerous emails saying it's crazy not to invest in this downturn, wanting people to pay them $50 for five stocks that will do great. Ha! Jack is one of the very few I trust, and I believe he really cares about the common man's welfare more than the almighty Dollar.”
Anne Hargrove - WA2012-11-12
“For sure the risk management in Jack's world is priceless.”
"Mary" - Trading Room2015-08-10
“"I'd like to thank you profusely for all the money I have made as a result of using your service and sage advice. I have made a TON of money using your service. I have learned a great deal about technical analysis from you, and it really works. I recommend your service to everyone I know. You are a great guide during these challenging times, and I highly value your thoughts and opinions. Keep up the GREAT work!"”
Alex NasonStamford, CT3/31/11
“"Jack is BY FAR the only one of the millions of analysts whom I have been able to "connect" with in the way that he explains everything. He really gets the message across, and the best part is his results speak far more than anything else!"”
Roberto AlvarezMesquite, TX03-21-11
“Being conservative in this crazy market to me is a smart thing and I think those of us with you feel the same. I'm thankful to have found your service and only wish I had done so years ago instead of months ago! Every market gives us new things to learn and you are a great teacher . . . . with your help I'm up for the year so far.”
"Cowgirl" - Trading Room2015-08-10
“Jack brings passion for educating the individual trader about technical analysis. He wants to give you the edge he sees the pros using: a deeper understanding of technical indicators."”
David MorrowEditor-in-Chief, TheStreet.com
“I've been a member for a little over 3 months now and have to say that I am incredibly impressed with your insight into the stock market. You've taught me some very important lessons with respect to patience, appropriateness and emotion. I pretty much rely on your alerts for trading (and usually regret when I don't!) - and your comments on the market are truly invaluable.”
Nick GudkaCulpeper, VA02-14-11
“Jack, I used to run a trading desk on Wall Street and only wish I had a technical guy of your expertise. You are extremely good at what you do."”
Michael DoctorHolmdel, NJ6/12/09
“I have taken many advisory letters over the past 30 years, but I have NEVER taken a letter which has the depth, common sense and knowledge which you display."”
Rob LedbetterHenderson, NV
“You are freaking phenomenal, Jack! Thanks for a steady hand at the wheel in a time of great uncertainty."”
Everton BaileyGreenacres, FL5/19/09
“My profit on your last 2 trades already paid for a year of SwingTradeOnline. My account is up more than 20% since I joined the service 4 months ago. Your analysis has made the difference."”
Marilyn OttGreenwood Village, CO12-16-10
“I joined up a few months ago, and during that time, Jack has been consistently and repeatedly correct with market fluctuation predictions, based on his expertise with the chart analysis. Jack's priority is safety for his subscribers, and that has been a critical key particularly in this kind of market. I feel very confident in following Jack's buy and sell recommendations."”
Joe PowellLaguna, CA
“Mr. Steiman, as I have followed him over the many years, has been quite informative and sometimes downright brilliant in his uncanny ability to pick a market and the stocks within."”
Roland AudetSatellite Beach, FL
“Jack, I've been very impressed with your work. Smart calls, superb analysis, great market knowledge and an appropriate 'cautious optimism' summarize for me your take on the market and your work. Keep up the great effort!"”
Guy NapierHinsdale, IL3/22/10
“Before signing up, I had been told that Jack was one of the best. I have now discovered that for myself. Over the four months I have been a subscriber, the value of my investment account has increased 140% thanks to Jack! In my investing experience, an incredible achievement!! His regular updates, honesty, personal touch, genuine interest in the well-being of subscribers, and trading knowledge and skills are unmatched in my experience with other trading services. I'm looking forward to a long association with SwingTradeOnline. Keep up the good work."”
James TurnerSun City, AZ6/23/09
“Thanks for the thoroughness and persistence of the analysis. Nothing like it anywhere I know of." ”
Steve KruvantSouth Orange, NJ10/6/09
“I just want to THANK Jack for providing information that a new investor/swing trader can use, understand and trust. Now when time is limited I only need to read SwingTradeOnline."”
Robert MaherPort Charlotte, FL
“Jack, thanks for the guidance along the way. You have been spot on. Many thanks." -Trader1 | "Excellent commentary, thanks!" -Eddy | "Wonderful addition to your service. Great job!" -Richie | "Thanks for comments on stops & chasing weakness. I've been trading 2 yrs, lost thousands prior to joining SwingTrade! Thanks for all your help." -Toby”
Comments In & About New Chat RoomChat Room4/27/10
“Jack, what a great reader of the market you are. Never too brash, just looking for opportunites whatever the market does. I really appreciate your comments and they help me to understand what is going on.”
Roy HookerBrisbane, Queensland, Australia6/10/10
“Jack Steiman is excellent on short- to intermediate term timing for swing trades. For people looking for short-term swing trades both long and short as well as market direction, there's nobody better than Jack on the Web!"”
Al SlaytonLos Angeles-based financial advisor and subscriber
“Educator, investor, trader ... Jack Steiman shows you how to move from emotion to "appropriateness."”
David PennTraders.comJanuary 2007
“I look forward to reading your views each trading day. They seem to be the only steady, rational, based on experience opinions I have access to. There is so much 'doom and gloom', 'the apocalypse is imminent' fear mongering out there to wade through that, 'When all around you are losing their heads', I find your choice of wording, the tone of your daily emails very concise and helpful. All I want is a clear-eyed view, a steady hand on the wheel and the facts as I can digest them from someone whose opinion I've come to respect.”
N. HarrisToronto, ON8/23/11
“Jack, I've learned more from you in the past few months than in all the previous 10 years I've been studying the market from other sources, especially on the subject of divergence and sentiment - probably the two most powerful technical indicators. Very educational!”
Dean DunhamEnglewood, CO09-16-11
“"Jack, thanks for all your help. Because of your advice, I no longer feel like I'm driving down the Garden State Parkway with a blindfold on!"”
Gary KlophausPipersville, PA10/24/11
“"I can't believe how thoroughly you run the service. It is FABULOUS! I am way up since I joined in April. Thank you, thank you Jack from my family of four!!!"”
Tim ReynoldsDanville, CA10/25/11
“I've been a member of your service since May 2011, and I want to thank you for the valuable education that you provide. I've tried other services, but they don't provide the incredible level of analysis that you do. I now successfully trade less on hope and more on reason. The webinar is vital - I need to hear your voice of reason. ”
Kim H.Palatine, IL12-05-11
“I've tried different services over the years and I have never had such a solid service as you provide. I enjoy the market comments and the trading discipline that you talk about. ”
Ricky JaramilloHolualoa, HI2012-03-28