It's all about 1315 and 1370. 1370 being the old highs and 1315 being the trend line from the old lows. Anything that takes place in between is simply noise. But my job is to try to figure out which way things will break, which is just not clear right now. The bears are fighting down here. Trying to rid 1335 with force and get through the 50-day exponential moving average at 1327. Because the two levels are so close the bears really need to push this towards 1315 quickly, so the bulls will then struggle with support-turned-resistance at 1327/1335.

Some big time leaders are definitely having a tough time these days that haven't had a tough time in years. Apple Inc. (AAPL), Google Inc. (GOOG), Amazon.com Inc. (AMZN), Molycorp, Inc. (MCP), and many others to name a few. Lots of leaders have lost their 50-day exponential moving averages. A change of character yet the market has not lost key support by any means. Rotation is keeping the market alive. It's also working down the oscillators on the daily charts. We're closer to the bottom of the channel, but nowhere near breaking down as of yet. It seems that would have to happen on some bad news overnight that gaps the market below the 50-day exponential moving average.

The market is trending lower for sure, but the bears need that snap down. If we lose 1315 then the market can really start to let things go to the down side. No real support until 1250. This is why the bulls will fight things so intensely the closer it gets towards 1315. Right now the onus is on the bears to get things done as they haven't been able to do so. But they are getting closer for sure. For the bigger picture market, it would be best if things just fell apart for a while to get pessimism ramping to very high levels. That's where the best bull moves take place.

Watching the commodity stocks today, they get a nice oversold bounce, but many of these stocks are broken short-term and trading well below major support-turned-resistance at their 50-day exponential moving averages. When they lost those key 50 tests, many did so with large gaps making the journey back through very difficult, if not nearly impossible, short-term. This means the market is now dealing with two broken sectors that matter a whole lot in those commodity stocks and the financials, which look totally hopeless for now.

The very worst market performers are those financials, thus, you need to stay away as much as humanly possible. There will come a day when they'll be good, yet again, but that time is not upon us. So look elsewhere if you need to play this game with any aggression. Semis are holding up well for now as the Intel Corporation (INTC) chart remains bullish, as do many of these stocks, but that may not last much longer. So we'll watch closely for that in a big way. If the best area holding up finally gives in, look out below. Froth is simply being taken out, and shot for now, stay away from those high P/E stocks if you must play.

Nothing has changed in terms of the forces guiding this market. Liquidity and the daily charts versus weekly negative divergences and not so good readings on sentiment. You also have to wonder whether the market is getting nervous about the liquidity issue as QE2 is about to end. Just six weeks left for that printing press. You know the fed is going to find other ways to keep liquidity pumping into the system since all he's concerned about is keeping the market afloat to some degree so that Main Street keeps flowing along. The fed is not worried about inflation for some reason at this moment in time, so it's my guess he'll use other tricks to keep the economy flooded in cash.

To do otherwise would lead to the most dreaded word in his language, deflation! Anything but that. I think the market will soon learn that he'll protect it. If that does take place, as I suspect it will, the market will likely struggle along for weeks, maybe months, to allow sentiment to pull back and get more bearish. It'll also allow those weekly charts to unwind some and work off some of that nastiness it holds right now. There are enough forces going on here that tells me the worst of this pullback would be contained by S&P 500 1250, or about 7% from here, if we do, indeed, lose 1315.

When markets are like this it's best to have no more than 15% exposure, if not all cash. If you're long, use 1315 as your line in the sand. You don't want to be in if that level is lost. You don't want to be short if we take out 1370 on the S&P 500. It looks like we're ready to move lower, but you have to see the move in order to play it. Again, I think it'll take a large gap down to get this rocking lower. It's hard to remove critical support intraday, although that's not an impossible task, just a very difficult one, for sure, as the bulls will fight if given a chance, thus, a gap down is better. Keep it light. Again, no more than two plays either way until a clear break is made.

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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