There really wasn't much to focus on last night from overseas. The futures were up higher, however, and the move higher in Europe, France, etc. gave our markets a nice boost as the morning wore on, allowing for a decent gap up once trading began. The gains didn't explode higher as we were overbought, but the gains sure did hold decently throughout the day. More of the same these past days as sentiment has really kicked in the trade for the short-term, which is allowing for short-term oscillators to remain overbought, an unusual phenomenon when you're in a bear market. The trade has really gotten out of control on the bearishness. More on that later in this report.

The gains were steady throughout the day, and it's always good to see that. It's important that the gains are wide spread and not confined to just a smaller area of the market. Some did better than others, of course, with retail really leading the way. The gains were around wherever you turned, and that's a real good sign. The other important things we look at were also strong, especially advancers to decliners. Once again, that gave the thumbs up, which means the market was carried by the masses and not just the few. Sure, some heavyweights had strong days, but it's clear that the gains were solid all over. When all was said and done, internals confirmed price, meaning this rally has legs, even though there will be some strong pullback's along the way, as always. Expect them and don't be afraid of them. Weakness can be your friend for the short-term.

It's very interesting when trying to understand what people are thinking about from time to time. For instance, we know the market wasn't bad last week, yet the bull-bear spread widened further to -11.9% from 10.8% the previous week. It happens, but it's not common to see the bull-bear have a double digit inverted spread. I would have thought the spread would still be inverted this week, but maybe only -5%, or so, after last week's stock market action.

Maybe it lags some, but what it does show is what we all know already in that few think the market can rise, thus, it does. It won't be a rocket ride so get that fantasy out of your heads, but it shows how fundamentals can be trumped short-term when the prevailing trade gets too full. That trade is more than full at -11.9%, and showing no inclination to rise up any time soon to a level that would allow the market to fall harder once again.

There is no way to know how long it'll take to bring optimism to the fore, but at some point it will rise up, but there's a long way to go before we just get out of inverted territory. This should keep the market somewhat protected for the short-term, if not the medium -term. Always I must remind you all that there will be some nasty down days as the market deals with some poor earnings reports from time to time. Don't get overly bullish, but do recognize the sentiment trade is on now.

There is another factor going on here. When markets have something in their favor such as sentiment, it needs a catalyst to get going on that advantage. The latest ISM Manufacturing Report came in a bit better than expected, and over the 50 neutral line between contraction and advancement. That started things rolling, and then we had the Germany and France meeting that basically started a new easing program.

They call it recapitalizing the banks. I call it free money. It is there for the public to use, if they'll actually use it. Many won't touch it, and in the end, it'll probably have been a bad move, but that is how every country seems to act these days. Throw dollars at the system and pray real hard. These two happenings were basically the catalysts the market had been looking for, and thus, the trade is on.

Every divergence, good or bad, needs a catalyst to get the trade moving. It happens, you get the reversal, and the trade is on. No different with sentiment. There may be other catalysts in the near-term to allow the trade to last longer than one would expect. We'll watch that as it unfolds. The market found the excuses, and it's rally time overall for a while longer with those nasty pullback's from time to time.

The Direxion Daily Financial Bull 3X Shares (FAS), or representative of the financials, broke out huge over the 20-day exponential moving average today and that's bullish. No other way to say it. It's bullish short-term for this market. A full candlestick basically with no real intention of testing that breakout during the day. This is what the bulls had been praying for in this sick market. A move over the key moving average to get the bears on the ropes for the short-term. 14.04 is now the next big feature on that FAS chart.

That's the 50-day exponential moving average, and it seems impossible that this level will clear, but we shall see how it works out in the days and weeks to come. If that level should somehow clear, and it would be a miracle if it did, the bears would really be in a defensive position. More than they already are for the short-term. If it can hold the 20-day exponential moving average on back tests that would be a warning sign for the bears that it wants higher. 11.79 is that back test level. Strong solid action in the banks today. Good to see.

We play the market day by day trying to learn its intentions. Some long exposure is appropriate. Know that there will be bad days. 1235 is resistance. 1175 support.

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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