Gap Up Failure But Positive Divergences In Place...Will It Matter?...It Did Late Today...

It should. Those short-term charts have some pretty compressed down oscillators that normally give a bounce, especially when they have a positive divergence in place. We have that here and, while we can't rule out a complete crater down, I don't think the market is quite ready for the next leg lower. Sure, in time, but not right here although you don't let your guard down and you avoid froth stocks like you would the plague. No reason to be involved with those types of stocks, even if we get the bounce. While this divergence gives hope for a short-term bounce, the medium term looks poor for the bulls at this moment in time. Things can always change, but the charts are suggesting lower in time. But again, I don't think so right away. We'll have the answer to that soon enough.

Today started out with lots of hope as Citigroup Inc. (C) reported a solid earnings report. The stock beat on the top and bottom line and was rewarded throughout the day, although it closed off the highs. That said, it was a solid report. The financials held up well, but once the Nasdaq was up fifty points it was all downhill from there as the bears are now getting aggressive on moves higher. They have the indexes below their 50-day exponential moving averages and are, going to fight like mad to keep it that way and that's what they should be doing.

It's been a rare time that they've been able to hold any advantage, and now want to be sure to not give it away. While today wasn't a disaster for the bulls, closing so far off the highs, even with good divergences in place, can't feel good. This is what often occurs when a market is shifting from bullish to more bearish for the short term. That's the case even with divergences and oversold. It's just tougher to maintain upside action. Today was certainly a case in point for how difficult the game is for the bulls now. Again, not a disaster, but far from encouraging. Hopefully, the existing divergences can take us higher before falling once again with force.

When markets turn like this from bullish to mostly lower it's all about adaptation. If they don't adapt they pay the piper in a way that's unpleasant and mostly unnecessary. If you recognize what's going on you can deal with things in a more positive fashion. Not only do you need to be able to recognize bull and bear markets, but these types of markets as well. Not bullish. Not bearish. But correcting. We still do not have a single open gap down on the Nasdaq 100, even though it's well below the 50-day exponential moving average, which is utterly amazing. Gaps should occur along the way but far less in terms of numbers of them due to the fact that this is not a bear market, but a correction. 1847 strong resistance for the S&P 500.

Nice and easy here folks. Again, avoid froth. Be smart and adapt to the market environment in place.