Now the leaders are taking gas. On Thursday, they threw eBaby into the bay. The one-penny miss by eBay (EBAY - commentary - Cramer's Take), one of the leading Internet companies, cast a pall over the Street despite the fact that it is one company in one sector. But, as I like to say, the news breaks with the cycles. As I said earlier in the week, the near-term trend is down.
Ever since the hawkish Fed minutes were released on Jan. 4, there has been a heightened sense of fear about inflation. But the action in the 20-year bond, which has rallied strongly and shows a triple-top breakout (see chart below), seems to belie that rationale for the weakness on Wall Street.
iShares Lehman 20+ Year Treasury Fund
In the last piece, I failed to mention (due to a lack of end-of-day data) that the Nasdaq and S&P 500 both registered Real Distribution Days (RDD) on Wednesday. The RDD in the S&P comes right on the heels of the Real Accumulation Day (RAD) on Tuesday. That is not, to say the least, a positive development, and Thursday's action, which showed many stocks gapping lower from the open, speaks to the fact that the S&P squandered the potential promise of Tuesday's thrust. Consequently, Thursday's action shows the S&P slipping back below Tuesday's RAD, offsetting that potentially bullish signal.
As you know, buy signals that are quickly offset typically lead to fast moves in the opposite direction. That suggests a low close for the week. Moreover, the S&P has lost the important 1183/1184 pivot, which is an important 90 degrees down from the high of the first day of the year. Bottom line, the bulls have snatched defeat from the jaws of the bears, who remain victorious in the near term.
Conclusion: Thursday's gap lower, which offset Tuesday's thrust, looks like it has the feel of a Hook, Line and Sinker setup. In other words, the S&P hooked up right to the resistance level that we outlined earlier in the week and has lined back down -- Friday/Monday may be the sinker back down toward our 1150/1160, which is 180 degrees down from the January high.
S&P 500 Daily
Nasdaq Composite
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Jeff Cooper is the creator of the Hit and Run Methodology and the author of the best-selling books Hit and Run Trading (The Short-Term Stock Traders' Bible), Hit and Run II (Capturing Explosive Short-Term Moves in Stocks), as well as a video course, Jeff Cooper on Dominating the Day Trading Market. He also created the Hit and Run Nightly Reports and co-founded a trading markets Internet site.
Mr. Cooper is also a principal at Mutual MoneyFlow Management, a money management firm that is a registered investment adviser. MMM and its affiliates may, from time to time, have long or short positions in and/or buy or sell the securities or derivatives thereof, of companies mentioned in Mr. Cooper's columns. In such event, appropriate disclosure will be made. None of the information contained in Mr. Cooper's columns constitutes a recommendation by Mr. Cooper that any particular security, portfolio of securities, transaction or investment or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. While Mr. Cooper cannot provide personalized investment advice or recommendations, he welcomes your feedback at jeff.cooper@thestreet.com.
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