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Stock Market Plays With The 20's/50's........

Stock-Markets / Stock Markets 2010 May 13, 2010 - 04:32 AM GMT

By: Jack_Steiman

Stock-Markets

The market started out with a bid somewhat higher based on words from Intel Corporation (INTC) late yesterday. They said things look strong for years to come. How do they know that? They probably don't but that's what they said and thus we got a one hundred point reversal in the Dow futures overnight. After gapping up, it didn't take long for more good news to hit when International Business Machines Corp. (IBM) said they see massive earnings heading in to 2015. The stock jumped. The market jumped. The bears jumped. Up we went. The market maintained its bid all day closing right near the highs with solid internals led by technology stocks as a healthy market needs to. A solid day for the bulls but somehow it still feels very uneasy out there and that's probably a good sign overall.


We saw really good news today for the bulls when it comes to sentiment. This has been a thorn in the side of the bulls for many weeks now with readings at roughly an average of 36% more bulls to bears. As of Friday of last week that number is now down to 22.5%. A 14.8% decrease in bullishness and exactly what the bulls needed to hear. It is my belief that ultimately the only two things that matter are earnings and sentiment. With that issue out of the way the market will now focus only on earnings which overall is still solid although far from perfect. We are seeing some stocks fail on earnings that you wouldn't have expected such as Google (GOOG) and recently priceline.com (PCLN). However, with news coming out like we saw in the past twenty four hours from International Business Machines Corp. (IBM) and Intel Corporation (INTC), we know that things are far from bad and actually on the improve for now. Is it long lasting? I have my sincerest doubts but for now the news is good on the earnings front overall.

The major indexes closed either just above or just below their 20-day exponential moving averages with all of them just slightly above their 50-day exponential moving averages. it didn't take long to come back and test those 50-day exponential moving averages and the way they got there is encouraging. If it's a slow grind on tiny sticks each day that's not very good news. However, the move up has been sharp and on some solid oscillators thus you can't say it's the type of rally that's doomed to fail. It doesn't mean we don't get a normal pullback for a day or so but it's not likely that things will just fall apart just because we've come up to test the 20's and 50's. In fact, with Cisco Systems, Inc. (CSCO) out on their earnings tonight, the futures are down some thus a pullback can occur tomorrow but again, I wouldn't expect anything horrific. If things fall in a fashion I believe they will, I think buying weakness is now a good idea.

The 20-day exponential moving averages are at 2418 Nasdaq, 1172 S&P 500 and 10,898 on the Dow. With closes at 2425 on the Nasdaq, 1171 on the S&P 500 and 10,896 on the Dow, the S&P 500 is the only one below and only by one point. The 50-day exponential moving averages are at 2398 Nasdaq, 1166 S&P 500 and 10,820 Dow. All indexes are above but not by enough to feel good about. Good to see the challenge so fast but these aren't through far enough to say we're successfully through. That may need more time. 1190 is gap resistance on the Standard & Poor's Depositary Receipts (SPY) and should we get that high, I would expect some selling from there. Won't be that easy to get there but over some time I think it's realistic. 2460 is the gap on the Nasdaq. We take this day by day in a very volatile market. A step at a time and buying weakness will be the likely game plan.

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.

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