Good news from overseas (China) gave our market a lift with regards to the futures over night. Economy there is doing very well. Our markets held on to their gains as things opened up, but there was a real headache staring us in the face once we got thirty minutes in to the trading day in the form of the big manufacturing report. The market did not want to see a number under 50 which is the dividing line between contraction and expansion. 55.2 was the number the previous month. We got 56.4. The market loved it. Showed we are still not double dipping at the moment.

The market raced higher once this report came out and never looked back. A gap up that ran. Exactly what the bulls needed short-term. If we had gapped up, but fell back and closed with a black candle, it would have signified a sell signal. That didn't come close to happening as the Nasdaq finished a whopping 34 points above the gap up open. Bears have to hate this. With bearish readings at very high levels, it tells me that today was no fluke rally and that it is likely we head higher still with normal pullback's along the way short-term. That's just short-term. Beyond that things are very unclear, and we could end up breaking down in time, but today's action tells me the near-term has overall upside action left in the coming days and weeks.

The financials finally exploded up today. Amazing how long it took for this sector to rock higher. There's no question that without this sector participating to the up side, this market has zero chance bigger picture and now we have to find out just how much is left in the gas tank for these massive under performers. I will be watching the oscillators closely for more insight in the next few days and weeks. This should tell me much more about the future of these weaklings. The semiconductors, the other big laggard, also shot up today, and this has to be the first time in what seems like forever that these two sectors danced higher together in a big way. The bulls can feel real good about this, because without both of these showing some real heart, there is no chance for them down the road.

Sentiment is the BIG story of this day. The bull-bear report came out showing a huge move to the bearish side of the coin. We now have 8.3% more bears than bulls, the largest inversion in quite a few years. It is very hard for the bears to maintain deep downside pressure when the trade on the bearish side gets this full. Always bad times for sure in the market, but again, it's about sustainability, and that will be very tough for the bears from here for a while. They will need to see things come out of the red and back nicely in to the green, or the bullish side of things, before we can get the next strong push lower in this market. Sentiment is now a big friend of the bulls for the short-term and should allow them to be a bit braver in terms of buying stocks.

So, now we can look at today and see we cleared the gap and 20-day exponential moving average on the S&P 500. 1063 and 1073 are in the rear view mirror thus 1063 should offer up good support on any overbought selling to come. 1085 is the 50-day exponential moving average and 1092 the 200-day exponential moving average, and only when that final hurdle is cleared with force should the bulls really start to feel good about themselves. Things have improved for the bulls for sure, but they really have to take out all the moving averages above to feel like they have seized back full control. Until that occurs, they have not done so. Watching closely as, of course, we have the big jobs report coming out before the market opens on Friday. If the market is above 1063 after the report on Friday morning, that would be very bullish short-term. Day to day here folks with no shorts the way to play short-term.

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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