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Money Rotating...Not Leaving The Market...

Jack Steiman from SwingTradeOnline.com at 01/08/10


This is maybe the single most important aspect of what's been happening with the stock market. Take a moment to reflect on the past many months. For a very long time the bears could not understand why the market was holding up with the banks and the rest of the financial stocks doing so poorly. Day after day we saw major stock leaders in that area of the market losing its 50-day exponential moving average. Once lost they'd stay lost. It was really more of a lose the 50's and run lower scenario which made the markets look extremely vulnerable. The key was how well the technology stocks performed at that time.
Day after day we'd see Google Inc. (GOOG), Baidu Inc. (BIDU), Apple Inc. (AAPL), Intuitive Surgical (ISRG), Priceline.com (PCLN), Amazon.com (AMZN) and others up on a high pole. They'd run higher seemingly every day.

This upward action protected the market from losing critical support levels on the key indexes. The 50-day exponential moving averages got threatened but they never went away in total. Today we are seeing exactly the same action but in reverse. We are watching the technology leaders get pasted while the financials hold the market up. Small gains in the overall market. Some days mixed with certain indexes higher and others lower but no threat to getting hit hard across the board. Leading stocks in the financials are getting bids and this is keeping things up for the time being while the bears finish off the down cycle in the big cap technology stocks.

We had a gap down this morning that got quickly bought up before those technology stocks started their intense moves lower. This caused massive under performance in the Nasdaq versus the S&P 500 and Dow. However, as the day wore on, even the Nasdaq was able to recover from some fairly decent losses mid day to finish down just one point while the S&P 500 and Dow were fractionally green on a percentage basis. Strong overall action for sure.
Now here's the really bullish thing for the bulls to ponder and for the bears to get sick thinking about. Although the big caps got slaughtered, the advance-decline line was 16/11 positive on the Nasdaq. So yes, the big caps held the market down but overall, many more Nasdaq stocks were up than down. A good day for the bulls.

It's important to touch on what I just bought up in terms of the advance-decline line. Those who are bearish, the market at this moment in time, want to talk about a deteriorating advance to decline line. I haven't seen it. Just because a market isn't racing higher doesn't mean things are deteriorating underneath the surface. Yes, the Nasdaq under performed but that's only because the most heavily weighted stocks such as APPL were hit. When the big cap leaders get hit but the food chain below those stocks does not, that folks is not bearish. You can try to play spin doctor all you want but that's just not bearish action.

Tomorrow morning we have the greatly anticipated jobs report. The market will react powerfully to it. That you can be assured of. Is the economy improving? Is it stagnant? Is it getting worse? Is it reporting the type of numbers that suggest we're in trouble or not? All of this will answered and you can bet we will see some intense volatility tomorrow. I have a feeling we'll go higher but that's pure gut feeling and no more. The number of strong bases set up tells me the market wants a little higher still before we get a more significant correction that many will mistake for the end of the bull run, but that's for another time. Hold on at 8:30 AM Eastern Time tomorrow. Things will most definitely get interesting.

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