Stock Market Bears Getting Close....

By: Jack_Steiman

That rising trend line has actually been broken to the down side, but the psychological level of 1315 is holding up for the moment. No arguing that the bears are making their move over the past couple of weeks. It took many tries to first take out 1335 on the S&P 500. On about the fifth try they broke it down and allowed for a back test that ultimately failed for the bulls. It's just what you'd expect from the bears once they captured this first important level of support. Now their focus is 1315 and nothing else. They want it badly but it's not coming easily. The bulls know the importance of this important support zone and will fight as hard as humanly possible to make it hold. You can see the erosion.

Day by day we're losing a little bit of ground in the overall bullish behavior. Advance-decline lines are eroding away. More and more stocks are losing their 50-day exponential moving averages. Fewer and fewer are recovering those lost 50's once they occur. With fewer stocks recovering it's getting harder to run back up. All this adds up to a recognition that the bears are starting to gain more control of things. But they've yet to conquer the holy grail of losing 1315 with force.

That's their only focus, and although it must be frustrating to them because of how well the bulls are holding things up, they aren't exactly walking away from the table. They are now fighting much harder. They have more of a swagger to their efforts. They seem more intent on getting this annoying support level to go away. This is why you have to play this game from this new perspective. One of much greater caution. You can't just expect the market to be able to explode up at a moment's asking. It's much tougher now, and will be this way for some time to come, even though there will still be strong up days in this process. Your game plan should be focused on how things are shifting from one side to the other. The bears haven't done anything yet to feel great about but you have to respect their efforts and the damage they've been able to create over the past several weeks. A whole group of Nasdaq stocks, along with other sector stocks, broke below their 50-day exponential moving averages some weeks or days back, retested them and are now breaking back down again. Some of the big names this is happening to are Bidu Inc. (BIDU) and Apple Inc. (AAPL) to name just a few heavyweights.

When big leading stocks back test and fail this is something to take note of because this is a complete of character we haven't seen in quite some time. Changes of character this significant than what we've seen in a year or more, should not be ignored. Lots of other changes are taking place as I've discussed above, but this one really stands out because of the leaders that are involved. Not only are these stocks failing on their back tests, but they're doing so with huge gap downs making the resistance created much more difficult to get back through. More and more headaches from a technical perspective are appearing, and thus, we have to really hunker down in defensive mode here.

There's only one thing keeping this market alive and that's fed Bernanke and his printing press. Let me make this very clear. If you think he's done printing dollars on his printing press just because QE2 is ending at the end of June, you're sadly mistaken. He will find many ways to keep the press rolling along and flooding the system with new dollars that should hold the market up bigger picture. Only if he walked away from protecting the banks would this market collapse. There is virtually no chance this will take place, folks. Not on his watch.

If the banks fail, the whole economy goes under, and he has spent and wasted too many dollars already to let that take place. He'd look like the biggest fool in the world admitting that he simply created more debt for no good reason and delayed the inevitable financial collapse. He will print away. He will do anything to keep Wall Street humming in order to protect Main Street. The dollars will continue to fly off his machine as all he's really concerned about is keeping Bank of America Corporation (BAC) and Citigroup, Inc. (C), and all the other big banks solvent. Nothing else concerns him. Not you. Not me. No one. Just the banks, folks. Just the banks.

Think about those financial stocks, folks. Think about the whole financial sector for the past many years. They have lagged badly throughout the entire bull market. There are clearly reasons for this. They know they are holding only by the grace of the fed and nothing else. Left alone they'd all go bye-bye, folks. The world of the financials is still very much on the critical list and only breathing through a machine. This is how tenuous things are for this whole economy. Follow those financial stocks for real insight about the real world. It's not a pretty picture by any means. The commodity stocks are now joining the financial stocks in acting and behaving rather poorly, and the market just can't afford to lose both and hope to hold 1315 S&P 500. The bubble on those commodity stocks seems to be bursting just a bit, so it's getting close to do or die time for this market. The days and weeks ahead will be more than interesting, but no matter how dire things look, the bears must remove 1315 S&P 500 with some force or they've done zero. Loads of cash is the best way to be positioned.

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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