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Consolidation Continues...Bullish Overall Action....

Jack Steiman from SwingTradeOnline.com at 11/18/09


Once again, with the market so close to breaking out, the bears could not take this market down appreciably. Oh, not for lack of effort. That's for sure as the bears tried all day to take things down, but could never gain any steam or momentum.
Every bout of selling was met with some type of buying, if not just enough to keep things over 1100 on the S&P 500. Not enough to blast up and out but enough to keep the status quo. That's all the bulls are really looking for anyway. They don't need to keep running things up, but they do want to keep things close to the area that would allow some further upside if broken through. They accomplished their goal again today as they have for the past many days thus the more bullish consolidation continues.

Even with today starting lower based on futures bought down by overseas selling, thanks mostly to some upside action in the dollar which was bouncing off 75 support, and from being oversold, the bears could not take the gap down and run with it. The market didn't get to any important level of support but simply refused to give way. The Producer Price Index (PPI) report helped some pre-market as there were no signs of inflation in the works, and trust me, when I tell you the market is keeping a close eye on that. The market did seem to find 1100 as support although its, again, not really anything important any more. The bulls seemed to sense that the bears wouldn't make the move appreciably lower than 1100 thus the tendency to nibble all day long.

With very famous "experts", such as Meredith Whitney and Dr. Doom, telling us lately that we'd get killed if we bought stocks, it's impressive that the market held up so well today. It was just yesterday that Ms. Whitney told us this market had no right going higher. She pulls a lot of weight in this game, and for the market to ignore her, says a lot. The bears could not ask for a better representative for their case, yet, it didn't bring about any good results for their side of the story. Good overall action for the day from a bullish perspective. The heavyweight couldn't knock out the lightweight.

The dollar finally got a bounce today off of massive 75 support. The question becomes, is whether it's a bounce in a continuing down trend, or is it a true reversal that says the dollar has reached its ultimate bottom, therefore, the stock market its ultimate top! This can not be answered based on a one-day bounce, but it's one that, of course, needs to be watched. The reversal wasn't rousing and in my opinion doesn't mean a thing. We have to see strong gap ups in the days ahead on strong volume with the UUP (PowerShares DB US Dollar Index Bullish) getting back over 23.00 to tell me there's something different going on now. For now, the trend remains lower for the dollar, and like it or not, that means higher for equities. Doesn't mean blast off. Means overall higher. Lots of ups and downs as we know.

As with any market that is trending mostly lateral, each day brings about a different place within the market where the action is more bullish and where the action is more bearish. The game of par. You need both types of action to keep the market in a consolidation, and today was no different. Commodity stocks overall were lower as were financials, but there were many areas where the action was quite positive. In the areas where there was weakness there was no technical damage done. That's the key. Selling is fine as long as it doesn't cause technical patterns to break. We're not seeing that day-to-day thus wherever the selling occurs, it has been a buying opportunity. If critical sectors start to crack, that'll be a huge red flag we need to pay attention to. For now, all is fine. If it changes, I'll make the necessary adjustments.

See today’s charts at SwingTradeOnline: INDU (Dow Weekly,) SPX (S&P 500 Daily Charts), SPY (S&P 500 Weekly), COMP (Nasdaq Daily), CRB (Reuters/Jefferies Commodity Research Bureau).

Bottom line is, as long as the major sector charts and index charts are holding over their 50-day exponential moving averages, which I mention daily to remind you, there is nothing bearish going on. It's noise within a lateral consolidation that is there to play with your minds. Daily MACD's are still crossed bullish from lower levels thus there seems to be nothing to suggest a crash or massive sell off is out there but you always keep your guard up. This is why no long-term portfolio. There is lots of risk out there we all know about thus day-to-day playing is the safest way to go.

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