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Stock Market Holding Well.....

Stock-Markets / Stock Markets 2012 Aug 14, 2012 - 03:43 AM GMT

By: Jack_Steiman


The market is doing its Houdini act as it hides from the fundamental story out there globally. It seems to have tricks up its sleeves as it works its way around the mess that's out there no matter where you look save for a few spots on the map. Major headaches abound, yet the market, even if it tries to sell off, has a tough time doing so. It tried to today, but the bears couldn't really muster enough energy once they had the S&P 500 just below 1400. The bulls came in and kept the selling at a minimum. Some red arrows on the S&P 500 and Dow, but they were very small losses, while the Nasdaq 100 flashed green by a point.

The Nasdaq 100 was really led by Google Inc. (GOOG) and Apple Inc. (AAPL). Both had huge days, Google on an upgrade from Morgan Stanley and Apple on news about a large number of new products coming to market sooner than later. The rest of the Nasdaq 100 stocks slightly under performed, but again, overall, the market held up extremely well. There are no time-frame charts of significance showing overbought conditions so the market can trade on its own here, if it wants to move higher.

Not being overbought, but being close to 3025, or the big breakout on the Nasdaq 100, is interesting to say the least. We're only three points away, but remember, breakouts need to be accompanied by strong volume. So we'll watch for that, if and when, the breakout occurs. With the bears failing to hold the Nasdaq 100 down today it's looking more and more as if the Nasdaq 100 will make the move. But you never know for sure. The bears should fight very hard here.

There are good signs here for the market. First, the Nasdaq 100 is leading overall, which is a necessary component to an up-trending market for the bigger picture. Froth needs to lead, and today we saw more froth from Apple and Google. These stocks, and many like them in the Nasdaq 100, are moving higher, many with very elevated P/E's. The risk on trade isn't blazing, but it's clearly on to some degree. If that can continue, there's every chance this market will fool the masses, who think we can't break above 3025 and head to the next resistance at 3085, which is also gap. It's the bottom of a gap down with the top of that gap near 3115.

The other good news is the continued overall success of how stocks are being received once they report on earnings. Some are getting totally hammered, such as (PCLN), and unfortunately, many more are being overall rewarded. When you see a good number of stocks being rewarded on earnings, it tells you the market isn't likely to be headed into anything resembling a bear. It certainly can pull back plenty, but a bear being very unlikely for now. That can change out of nowhere, but until it does, the market isn't flashing anything that says run for the hills.

If you want the real number-one sign that things are about to fall apart in the not too distant future, you have to look at how stocks are pulling back off recent tops. When the majority of stocks sell on high volume off tops, this tells you bigger money is distributing. That's a real bearish sign that the market isn't long for good upside action, and that something nasty will likely hit out of nowhere that will catch the majority off guard. As I watch the process of normal pullbacks take place, I am not seeing this type of volume action. I'm not seeing any real accumulation, either, off bottoms, but more importantly, I'm not seeing distribution. That usually means the top isn't in quite yet. We saw massive distribution at numerous tops going back roughly one year in silver and gold just before they tanked out. This is what we have to start looking for now. Maybe it won't come for some time, but that would be the real number-one red flag for the markets future. Thus far, the bulls aren't seeing bearish distribution and that's a good thing.

The market is really all about Nasdaq 100 3025 and whether the bulls can collect themselves and blast through this level on increasing volume. The 200-day exponential moving averages are roughly five percent below current price, so that's no concern for the moment. Our focus is on Nasdaq 100 3025 and we're right there. The futures will be interesting tomorrow morning. Will we be gapping above? And if we do, we will need to watch the first ninety minutes worth of candles to see whether it looks like it'll hold. We'll also have to watch and see if it's a gap and run up, or gap up and churn, which would be a small red flag that we just won't get what we need. The first ninety minutes usually tells that tale. Some exposure long remains appropriate, but nothing overly aggressive yet.



Jack Steiman is author of ( ). Former columnist for, 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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© 2012

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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