Not great, but if the bulls want to exhale now is the time to do so. If this level is lost on a closing basis it's not good, especially if it's lost with some force behind it. We certainly did lose it intra-day, but the market started to get oversold, and thus the usual rally ensued. Not a great rally. Nothing earth shattering and nothing to hang your longer-term bullishness on, but at least the bulls can say they held the line in the sand on the S&P 500 for one more day.

The gap down today on the Durable Goods Report really looked bad. With the Nasdaq already losing key support at 2167/2170 yesterday, it didn't seem like losing 1050 on the S&P 500 was going to be all that difficult, but this is the first real test down, and it took many attempts by the bears to remove that 2167 area on the Nasdaq, so holding today is no real shock. The bears have at least taken things down close to 1050, and I don't think they're going to let it get too far away from them on any rally attempt that may be coming up short-term. For the day, the bulls made the necessary reversal, but again, nothing to feel all that good about and definitely nothing that say you should be getting long here very much.

Another piece of hope for the bulls short-term is the nature of the bond market which has been straight up on the iShares Barclays 20+ Year Treasury Bond (TLT) and straight down on the inverse UltraShort 20+ Year Treasury ProShares (TBT). The TBT put in a bottoming stick for the very short-term only today on strong volume while the TLT made a topping stick on huge volume as well. The overbought and oversold nature of these is in play as well as the RSI is over 70 on the daily chart on the iShares Barclays 20+ Year Treasury Bond (TLT), and under 30 on the daily chart on the TBT. This suggests, along with those candle sticks from today, which we should see a rally on the TBT and a move lower on the TLT for a day or so, and that should give the market a small bounce. Should because you never know for sure. Things can stay overbought and oversold but the set-up is such that one would expect reversals over the next day or so.

Strong resistance comes in on the Nasdaq at the 2160 level, or that major gap down point. We also had major horizontal support there four times before the gap broke it, thus the gap is powerful resistance. In addition, we have the trend line off the lows from March 2009 lows at 2170, so the confluence of resistance from 2160/2170 is extremely powerful and must be respected. It would take some fabulous economic news to get the market to take back that lost area of support now turned resistance. Support is clear on the S&P 500. 1050 is massive, and then so, too, is 1010. 2100 is strong support on the Nasdaq.

We are seeing interesting levels on the bull-bear spread, but nothing too dramatic. A 2.2% spread of bulls to bears. In the very worst bear markets we can see levels at 20%, or a bit more. Normally, once you start inverting, the bears have a much tougher time taking the market lower with force. It can happen, but normally the moves lower are more from a whipsaw perspective. This sentiment issue is something to keep a close eye on as it suggests the masses are out of the market, meaning there is a lot of cash sitting and waiting, but no one knows when that will be deployed back in. For now, we're not at extremes but getting awfully close, and thus again, it must be monitored for future reference on how to proceed.

One slow step at a time here folks. A very tough and dangerous market with loads of overhead resistance. Lots of gaps, etc. Nothing aggressive on the long side should you try to play a bounce. We are still in an overall down trending market.

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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