Gap And Run...

The bears can finally celebrate a day for themselves. It has been rare, although the market has been basically whipsawing about quite some time as those bears have been fighting a bit harder recently. This evening they deserve their little party. They didn't allow the bulls to fill the gap down, which led to a gap and run day for the most part. It wasn't straight down with force, but the bulls rarely made a move to get things on their side. Whenever the market rallied a bit, the bears said not today boys and girls. Not today! We have created some technical damage, and we're not giving it back.

Gap and run can change psychology, and today the bears did just that. You could feel the bulls giving up as the day went along. A rare time when things weren't reversed back up after an attempt to sell. The game has been, and always will be, about psychology. Fear is harder than greed, and requires mental energy. The bulls don't want to use their brains. They want to simply follow the herd and let things rise. They're used to that. When things change you know they're feeling the heat. Greed can change to fear in a day. We shall see if that formula starts to take hold. It will if the bears can finally eradicate those key 50-day exponential moving averages. More on that later on. For today, the bears get to celebrate. Technical damage in place. That said, they still haven't done the dirty deed. They only took the first step today. They shouldn't celebrate too hard just yet. The bulls aren't dead, just wounded.

So what levels are we looking at you ask? Simple. The loss of the 50 day-exponential moving averages are all that matter to both the bulls and the bears. In bull markets you worry only when that level is removed. The 20's are important, but since the 20's are above the 50's in a bull market, it's not unusual to back test from the top of those critical 50's of support. So only when the 50's are gone do you make the connection that a real selling episode is upon us. Not a moment before. Only when they're truly gone. Then you have to back test over time, and if that back test fails, then you know the bull is over for some time to come. Lose the 50's, back test them and then back down and you're golden if you're a bear.

So it's 1977 on the S&P 500 and 4493 on the S&P 500 and Nasdaq, respectively. Markets can look very ugly when they're selling off the top and coming down for 50-day tests. It can feel like a bear market from above the 50's, yet it's not. So please don't get too bearish too early on in the game. We only know that today was a down day in a still existing bullish handle. That's it. That's all we know for sure. Yes, technical damage for sure against the bulls, but gaps can be taken out, so don't front run and think it's a slam dunk that we just melt down here. We know nothing. We only know what price is saying, and for now, it's saying it's above the 50's, no matter how bad things look due to today's action. Lose the 50's, and then back test, and then fail, and then knock yourselves out bearishly.

Commodities are in bear markets. Pretty much across the board. They shouldn't be owned, in my opinion. That said, they are all very oversold on many levels regarding their oscillators. The moves lower have been hard and straight down in many cases, but be careful getting too short on these here, since they are so oversold. I personally wouldn't own them, but if you want to, that's great for you. Follow your heart. That said, I wouldn't be shorting sub-30 RSI's on the daily charts. They can stay there, and even go lower, but the risk reward isn't great, so shorter beware in the short term. Do what feels right to you from a long or short perspective, but recognize they're in bear markets, but they are oversold. In some cases, extremely so. Proceed cautiously.