The market started to sell today. Finally!! We started fairly flat but then started heading down with the Nasdaq leading the way, which made sense since it has been the leader on the way up in this bull market. What leads up is the most overbought thus it's likely that it'll lead down to unwind those oscillators. However, a funny thing happened, yet again, when this market tried to sell off. It couldn't stand the selling. Very unusual to say the least. This market was at extreme levels of overbought coming in to today thus when it started to sell it made sense that the selling would stick and it seemed that it would. A few buying attempts were thwarted down by the bears, making today seem as if it would be a trend down day.

Then came the final hour and then in came the buyers. The market clawed back with the Dow going green along with a fractional gain from the S&P 500. The Nasdaq down a few points. The S&P 500 closing once again at the 1150 level, seemingly begging to break out, overbought or not. Such is the way of a bull market, like it or not. It just can't find sustained selling as buyers rush in the moment they see some selling. Fear of missing. Try telling anyone who's ever been around this game that it isn't 100% emotional. It is and when a market is trending higher, the natural inclination is for buyers to step up whenever it sells some, even if it seems it's not enough. Usually it's not really enough but the emotion is just too intense and thus traders rush in. Today we saw this late. It is what it is, enough selling or not.

Keep in mind we have to respect the fact that we are overbought still. This means that we can still sell at any time. The S&P 500 could stall at this 1151 level and just meander for a while thus there's no all clear here. You do, however, need some exposure at all times in a market such as this one simply because it refuses to sell a while lot before buyers show up. This reality means there will be times when some plays are under water a bit and such is life. You have to be able to mentally deal with this reality and accept it for what it is with the understanding that good base set ups, such as the stocks we're in, are likely to make a strong move higher over time. Patience is the key after you've seen a move higher and you've gotten used to quick gains.

Any selling that takes place above those 50-day exponential moving averages is just noise within the up trend and does NOT tell us that we're too bullish with regards to sentiment. Bears may tell you that is the case but it is NOT the case at all. It's important not to get too emotional with normal selling that takes place from overbought within an uptrend and not to rush to a conclusion that it's based on extremes of bullish sentiment when that spread is only 21.3%. For now there is no problem with the level of bulls to bears at all. There's quite a ways to go before that becomes a real problem again.

The key to a bull market is those daily internals. We have watched this rally from the very beginning show characteristics that say this market can continue to climb. We have seen the advance decline line stay strong throughout. On the up days we witness spreads of advancers over decliners that tell us the majority of stocks are participating and from all over the market place. On down days, money finds a way to rotate in, keeping losses to a minimum and from keeping decliners down enough so as to not overwhelm the advancers. New highs continue to expand while new lows go nowhere. The momentum indicators continue to impulse or advance hard with price. Nothing on the bullish end of the coin is lagging.

Price is strong as are the internals and until this reverses, we have to trust the message being sent. It has worked so far and there's no reason to believe it won't in the near future. Stick with what's working until that trend changes. No sign of that yet. Some day it'll all change, of course, but for now the market internals are saying higher prices, above S&P 500 1151, are coming soon.

Support on the S&P 500 is near 1130 on gap down to the low 1120's. Can we fall that far? Sure we can although the market is showing no signs of wanting to do that. if the S&P 500 can break cleanly above 1151, it'll use that level as massive support on back tests to unwind future overbought conditions. If we start losing 1120, then something else may be developing but I don't think that's in the markets future here. The Nasdaq has great support down to 2300 but I don't think we'll see that either, especially if the S&P 500 clears through 1151.

If the S&P 500 sees 1130 or so, then the Nasdaq can see 2300. The key here is the S&P 500 making the move through 1151. Again, this can then act as strong support down the road on pullbacks. Very interesting time for sure here as the bears are feeling the heat with the S&P 500 trying to clear 1151. Next few days will be very interesting.

Peace

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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