The market closed last week a few points above that critical area of support for the S&P 500. With the Dow and Nasdaq already decently below their critical levels of support or the 200-day exponential moving average, everyone was wondering this weekend whether the S&P 500 would follow along.

The bulls knowing very well that if the S&P 500 lost 1375 with force, we'd spiral down. Possibly even swoon down very hard. More forcefully than many think likely. We woke up to slightly green futures that held throughout the morning. We opened up a drop higher, and after churning a bit, fell into the red with the S&P 500 getting within a couple of points of that magic level. It looked ominous, but the fact that we didn't gap down below 1375 gave the market hope for the day. Normally, when you lose a key level, you lose it on a gap down. It can and does happen intraday from time to time, but historically these events occur with strong gap downs. Yes, sometimes the gap down is still above a key level, but if you set a big gap down in place, that's when you can have an intraday breakdown.

Gapping down is very important bigger picture in terms of breaking down through strong and powerful support levels. So after going red the market fought back, and when all was said and done, the bulls kept the S&P 500 from forcefully or even tepidly breaking through 1375. Something they'll be trying very hard to do every day for a long time as they try to give themselves some breathing space from losing those 200's. Keep in mind that although we did hold today it wasn't anything special. The market is still vulnerable to losing 1375, so don't take today's victory as something to get excited about. It wasn't a rousing victory for the bulls by any means. You still need to be on guard for a potential breakdown below 1375 on the S&P 500.

Apple, Apple, and, yes, Apple. Market leader, Apple Inc. (AAPL), is the number one leader, I should add, has had a very difficult time sustaining any real bid for the past six weeks. The stock has dropped over 155 points, yet it still can't find a bid. We had gotten to know AAPL as the stock that always bid higher, especially if it fell one or two percent. The stock was loved by everyone. Even on market down days this beast would find a way to work higher, leaving the bears totally frustrated. And who can blame them. It seemed as if AAPL could do nothing wrong. Then along came their earnings report, and the stock has not been able to bid consistently since. It has brief flashes of a move higher, but this only occurred at times it got very oversold on the short-term charts.

The daily chart has now joined in at oversold. That is an extremely rare occurrence and tells us the nature of how weak it really is. Even at oversold on the daily chart it can't find a bid. To find a short-term market bottom it seems to me we need to see the type of candlestick on AAPL that says it has bottomed. It can rally from oversold, but I'm talking a real bottom, not some $10-$20 rally that just fails out. To me, that normally takes place when the stock is weak as it is now and then has a massive gap down on big volume that reverses as the day moves along, closing at, or above, the gap down mark. Also on big volume as it reverses. Until I see this take place, in my mind it's still only able to rally from oversold, but not much more. Nothing sustainable. I'll be watching daily for this to happen.

Look folks, this market couldn't be more boring and more no fun than it is right now. I get it. The market is nearly oversold on all the daily index charts and is basically oversold on all the short-term charts. Markets can stay oversold. Maybe this time it will and we will lose S&P 500 1375. It won't be easy for the bears to capture this powerful last level of key support for the market, but they will try very hard to get the job done as will the bulls try in terms of defending it. There's a lot on the line here regarding 1375, so watch it closely with me. If it does go away, with force and maybe some volume, the market could truly free fall. The bulls are in deep trouble if it goes away. 1335, or so, is next after 1375, and that would be a very painful drop if you're holding longs. Take this one day at a time as few areas of the market are doing very much in terms of bullish action. It's a bit ominous out there, and thus, the market is vulnerable. Let's hope it can hold, but with the Nasdaq and Dow below, the S&P 500 is very close to joining the lost 200-day club.

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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