There are no doubts about our trading days beginning with the futures over in Europe and ending with whether their markets will recover or not. Our markets continue to remain oversold on the short-term charts as they seem to stay focused on the headlines out of Europe. Unfortunately, the news out of the Euro-zone is never good news. There are bank problems, an inability to agree on solutions, yields rising, sentiment crumbling, and just no good news from anywhere about anything significant happening on any given day. It's beginning to cause the market to lose hope and faith, and trust that something good will be had anytime soon. Just like the average trader and investor, we all fear that financial disaster awaits us, and that the debt crisis spreading around the world will end unfavorably.

With that said we can certainly understand why our market has been slipping lower and lower all week. This week ended with intense losses, many sighs, and some folks just giving up, which is unusual for this time of the year. Thanksgiving and Christmas is usually the time of year that has people feeling happy. There are usually good vines throughout the world as we enter the holiday season.

Instead, the crisis in Europe is so strong that even with the Christmas holidays approaching there is just no bid. At a time when interest rates are historically lower, we are seeing strong out flows of cash from funds and almost no new money entering to buy stocks. Right now it seems as though folks are more interested in not losing than worrying about how much they can make on their money.

When it gets like this it dries out liquidity and markets drift lower. If the wrong news hits, they don't just drift lower, they get slammed lower. The lower we go the more malaise sets in, and the cycle repeats over and over. Wash, rinse and repeat. This goes back to the argument of never playing the time of year, but simply playing the markets message. Nothing is a hundred percent the same in this game. Adjust to the market conditions and you'll survive. Play seasonality at the wrong time regarding market news, and you can get annihilated. It's always about the market, not the date.

If we study the monthly charts, we see that we have not broken down as of yet. The market may try to hold on a while before breaking down below those levels, but we never want to lose longer-term chart support levels. When that takes place, it's very bearish for the long-term. The levels being 1150 S&P 500. We're close. Too close for comfort. 2368 Nasdaq and the Dow 11,052. It would take one, or two, more bad days for all of these index monthly charts to break down. The bulls better get rocking sooner than later, or things will get very nasty.

When monthly charts break the falls can be very rapid and without mercy. These levels need to be watched closely. Even if we do get a much needed bounce in the market, it doesn't mean these levels are safe bigger picture. Sometimes we simply get the much needed relief bounce to set the oscillators back up so they can fall harder again. Unless we rock higher, any bounce will likely be short lived, allowing the bears to do their dirty deed.

Sadly, with all the selling over the past few weeks, the sentiment issue has not reversed back down hard. In fact, it stayed at the same level of nearly fifteen persent more bulls from the prior week, even though we sold hard last week. The sentiment trade is over as predicted. It just unwinds naturally over time. Those double digit inverted days are long over as are any inverted levels. This tells us that the market is now trading on fundamentals alone.

That's not good news for this market, or any market around the world these days. Even the put-call readings have leveled off from extremes the past week, or so. Now we watch, and wait, to see if those monthly levels get taken down in time. As far as the near-term goes, we did lose 1177 and 2512. So, now those levels will act as resistance on bounces. The Nasdaq is lagging, and that's always bearish. Froth needs to lead, and it's not. At least for now we take a defensive posture. Watching closely as things move along. But the news thus far isn't good.

Lastly, although things look bad, we are very oversold. Some short-term divergences forming, which suggests, we could chop around with a slight upward bias for a few weeks, or so. Nothing to get overly excited about, but some rally seems quite possible. Shorting right here doesn't seem best. Take it easy until things unwind. If you need to short, go ahead, of course, however I don't think it's the very best time to do so.

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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