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Now The Bulls Fail..For Now...

Jack Steiman from SwingTradeOnline.com at 12/02/09


Yes, that's the way it has been for nearly three months now. Each side taking turns missing out on their opportunities once it's right there for the taking. There are enough bulls and enough bears at critical junctures to be sure that no one takes the other side to their demise. Oh so close the other day as the Nasdaq challenged its 50-day exponential moving average. The bulls came in and blasted things right back up. Today we saw the S&P 500 and all of the major index charts get right to the top of their wedges only to see the bears step in and say, no way boys and girls. The market has flashed so many head fakes to both sides you really can't keep track any longer. For now, we only know that the up trend is in place, but we also know that neither side has total control and only when the bulls blow through 1113 on the S&P 500 can they say all is clear. For now it remains a desire but not a reality.

The market was flashing some good futures this morning all based on news overnight that Japan would grow faster and stronger than expected. Add in a call from Morgan Stanley (MS) that Japan's stock market would rise 29% next year and you had a double dose of froth that sent their futures flying higher. The froth virus spread to Europe which then was sent skyward to our futures. Up we went out of the gates. It was a strong move that ran up as they went along. A Poor ISM Manufacturing Report 30-minutes in, meaning still showing expansion but lower than expected, sent the market well off the highs only to see the market come soaring back up as the morning went on. A solid showing throughout the day, especially when you consider that the financials really didn't participate. It's more bullish when a market can run higher without an important leading sector not participating. Shows good strength elsewhere, which is always necessary while a market consolidates a previous move higher. We ended up closing decently off the highs but still a positive day nonetheless. Solid action albeit shy of the necessary breakout the bulls had hoped for as the day wore on.

I am still hearing a lot of dooms day forecasts out there. I am not saying those reports can't be right. Some coming from some very popular analysts that folks pay a fortune for. They've lost a fortune paying that fortune listening to them over the past few months. They have been saying this market has to get annihilated simply because it does. The too far too fast stuff. The economic stuff. On and on. You should NEVER call for market death until you see some real evidence pointing to it as fact. Clearly, you know the rules there. Loss of 50-day exponential moving averages on all the right internals, etc. So many out there are playing with their hearts. It's understandable as the real world isn't necessarily correlating to the stock market. Can't play that way, though. So many are buried since July or thereabouts as they've been so bearish. I have said it enough times to make me cry “I'm so sick of hearing it!” in my own head. You can't short an up trend until that trend is proven to be broken. It is not broken folks. Simple as that. Please continue your trading under that assumption.

Red flags do abound as I have spoken about yesterday. It's easy to look at those and just give up the game here. I get that. The worst of which is the behavior in those financials. It really isn't very good and I am the first to recognize that. It's not great to see stocks like Apple Inc. (AAPL) struggling with bad divergences under major resistance. It's failing to keep up lately and that's not normal, but it also could simply mean it's resting after a long run. Much like the market, just consolidating. It hasn't lost major support and until it does you have to give it the benefit of the doubt. Other areas where we are losing the 50's, we are doing so at a time when those stocks or sectors are getting very oversold on their daily charts and that often leads to a capture back of those lost numbers in due time. That has been the problem for the bears. When they do get something to break down they can't hold on as oversold is not staying that way very long. So yes, red flags do exist, but this market is holding up well.

S&P 500 critical supports remains at 1072. For the Nasdaq it's 2121 and for the Dow it's 10,001. Gap support for the Nasdaq is now at 2162. Lots of good support abounds. We watch these levels day by day and we watch that 1113 S&P 500 resistance area and wonder when will something break! Who knows. Just play the game appropriately. Weakness is here, is strength there. Financials weak but semis strong today.

Market is holding just fine folks.

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