Market On Breakout...

Jack Steiman from SwingTradeOnline.com at 01/05/10

Friday was ugly and certainly well within normal behavior when you consider just how overbought those daily charts had been. Some unwinding was needed thus that selling couldn't be unexpected. You would think that the market would spend some time unwinding further but not this market apparently. The futures shot up overnight. The dollar fell and that was the perfect tonic for the market. It seems a falling dollar is still the best medicine for this market, although we have seen the market stay resilient when the dollar sells. Seems the bears can't get it right on either side of that trade these days. We gapped up and never looked back although the move up after the open was more on the gradual side of things.
Not a blast up and out but a nice slow and smooth move higher throughout the day. We closed a bit off the highs but it was still a solid day for the bulls. Every index is now basically on a buy signal. Nothing around for the bears to really hang their heads on except sentiment. That will kick in at some point but for now the bears just can't catch a break.

What made today so bullish is the reality that we completely engulfed the down sticks from the action on Friday. Whenever an up trend is confirmed such as this one is you look for evidence that it will remain after you get some much needed selling. That often will show itself in an engulfing stick we saw today. An engulfing stick meaning it was up more today than it was down Friday and thus it "engulfed" the entire down stick from last Friday. The volume obviously blasted higher based on the fact that the holiday season is now over and everyone was back to work. If we had gapped up, engulfed, and then closed poorly and printed a black candle, then today wouldn't be nearly as bullish. The bears would have had something to hang their hats on. The engulfing candle today speaks volumes about this overall market and how the bulls remain in control.

See today's charts at SwingTradeOnline: INDU (Dow Average Daily), NYA (NYSE Daily Composite Index), SPX (S&P 500 Large Cap Daily Index), DJUSCA (Dow US Gaming Index), PowerShares DB US Dollar Index Bullish (UUP), SSEC (Shanghai Stock Exchange Composite Index). 

An important event that took place today was the action from Goldman Sachs (GS). This key financial stock had been trading below its 50-day exponential moving average for a very long time but put that to bed in a big way today. When a key financial such as this one gets rocking, it's harder to keep the market down from a bearish perspective. It's such an important stock for this market. Remember, this is the number one leader in the financial world. Today this monster made a strong move back through those 50's with some real force thus we have yet another weapon for the bulls to hang their hats on.

Intel (INTC), Cisco (CSCO) and many other big caps that much of us never look at because they've been both poor performers and they move so slowly, are now just breaking out.
Long bases were in place and now many of these big boys are starting to crank higher.
Bases that were in place for long set up some pretty big moves once the breakout is made. It'll be an interesting watch to see how far these can actually run. If they stay elevated for a while, these big caps carry a lot of weight on the averages and would therefore keep the markets moving higher taking many other stocks higher with them.

Look folks, sentiment will catch up with this market at some point but there is nothing within the charts suggesting that the market won't maintain an upward bias, even as the market corrects some of that sentiment off. It doesn't take much selling to get sentiment to change from bullish to less bullish. Fear kicks in fast, so when the time comes that all the bulls are in, the change to bearishness will be rapid. There is a lot of gloom and doom out there, folks, predicting the end of this bull and many have their folks 100% short. I do not believe that this group of players will be getting any real satisfaction in the near future. I can't pretend to know how long this market will hold up overall. How long pullback's will be bought. These questions are not something I can answer right now. A day at a time for now. Things remain bullish. Don't play against the trend.