Stock Market Down Month....Bulls Holding Key Support....Bears Holding Key Resistance....

By: Jack_Steiman

Boring times such as we are experiencing now can also be construed as interesting if you dig underneath the "nowhere" movement of the market. It's really interesting how both sides are holding massive support and resistance when the charts approach them. So many times this past week the bears banged hard on 1315, even hitting 1311 intraday. They simply could not get the job done.

Once they failed to get through enough times the bulls tried to get more aggressive and played the game of let's try to take the bears to their knees with a move over trend line resistance at 1335. No can do. Close but no ringing of the bell. You'd think both sides feel a bit frustrated with their lack of getting the job done, but that's the market we're in right now. The range has gotten tighter and tighter for sure. A simple 1.5% range on the S&P 500 between 1315 and 1335. The only two numbers that matter at all. Anything else is a waste of time worrying about it. So today we close much closer to the top of the range finishing at S&P 500 1331.

Oh so close, but we all know that close means nothing and has meant nothing for too long now to get excited about it. It makes you wonder how much fun it would if we could only get a few more points out of things and get another quick move up in the market. But you shouldn't even think about it. See it and then get excited if you're a bull, but unless you see it don't waste a moment playing off it.

Don't anticipate it. A lot of anticipating on the down side buried a lot of bearish plays for folks. If you get too excited on the long side here, one little gap down will have you feeling like a failure for running the move before it took place. Bottom line is the market is whipsawing around haphazardly right now with no clear cut winner for the short-term. The lines in the sand are set about as clearly as they could ever be. 1315 and 1335. A fun week coming up next week as one would hope we'll finally see one of those levels get taken out with some force. See it before you act.

Two headaches, well one and a half headaches remain for the bulls to have to overcome. The weekly charts still look poor and could do far more unwinding over time in order to work off those large negative divergences. They don't run down very quickly because of the time frame involved. Weekly's take time, although the past five weeks of overall down side action have worked off some of those divergences. Still could use quite a bit more. MACD's are down some, but still quite high and near the top. Want them down near the zero line or at least close. Right now they're quite a bit higher than that across the board on the major index charts.

On top of that weekly headache we still have a minor problem in terms of sentiment. Yes, the bull-bear spread has gone down from 41.6% to 23.6%. 23.6% is not a problem normally based on historical data. However, in this case, the bears are still only at 19.4%. Not very good at all. You want closer to 30%. It seems the market somehow needs more fear in time to bring things down and get more bulls to go bearish and more neutral folks to go bearish as well. Again, it's hard to say sentiment is a big problem at 23.6%, but I would be much happier with bears near 30%.

One thing can't be argued and that's the fact that many index charts on the daily time frame have unwound quite a bit off the top. Most got oversold on their stochastics. When you're in a bull market and things get oversold on the daily charts on even one of the key oscillators, you usually spend some time moving higher to unwind things back up at least a little bit. That process is under way. The stochastics have crossed back up bullish, but in this environment, you have to wonder just how high they can run.

It's unlikely that we'll see them blast up to the overbought zone, meaning 80, or above, but that's always a possibility. The weekly problems we have probably mean we won't get overbought, but not impossible by any means. The MACD's have gone from well above the zero line at, or below, the zero line and RSI's have gone from 70+ to the upper 30's or low 40's when we had bottomed out a few days ago.
Now they're only back to neutral around 50. Nothing is even close to overbought as we speak, thus, we can try to break through this 1335 trend line headache for the bulls and try for one more high. Any new high would create terrible negative divergences once again on the daily and weekly charts so don't expect the market to explode out. It's not going to happen. The daily charts are still a bit more favorable for the moment, but don't forget how poor the weekly charts are.

Just continue to be extremely patient folks. Take your time and don't put on too many plays. Be appropriate here. Recognize the risks on both sides and wait to see which number gets removed first, 1315 or 1335 S&P 500. Aggressive playing means you're playing from greed, and that won't work most of the time so again. More than 15% exposure makes no sense to me, but of course, always do what feels right to you.

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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