Once again it looked like the evil pullback was under way. The futures were bad and worsening by the minute as European stock markets were diving. Flat futures became nearly one hundred down on the Dow and roughly twenty-five on the Nasdaq, Ten was the handle on the S&P 500. The market gapped down hard but refused to get worse than the opening print. It spun around in a very tight range the first hour or so and then slowly but surely started to improve. The Nasdaq was leading the way and this despite the fact that three major leading stocks in the land of technology were taking hard hits. Apple Inc. (AAPL), Google Inc. (GOOG), and Priceline Inc. (PCLN) were all down with the first two down particularly hard. They worsened yet the market was improving. That has been the powerful theme of this stock market.

Leaders can stop leading yet the market heads higher. That's obviously not the normal behavior of any stock market but goes to show you the power of rotation. If folks need a place to park their dollars they will rotate and find a place to put it. That has been ongoing for quite some time and, for now, quite interestingly, it is not showing and signs of letting up. When leaders fail markets fall. Or at least they used to but not now. As long as that theme continues on the bears are going to have a rough time of it. When all was said and done the bulls were able to print small gains on the Nasdaq with only very tiny losses elsewhere. Solid, bullish action continuing even though the market isn't really going anywhere special these days.

When risk is high such as it is now due to overbought conditions and some sentiment issues, the best way to play is more conservatively. Aggressive behavior can come back in to play once things unwind on those longer term weekly and monthly charts. While it's fun to play the bigger beta names, on selling days, these stocks seem to be taking the best hits to the down side. Stocks that have dividends or lower beta seem to be holding up best. That doesn't mean you can't play anything with beta, but be sure the set-up is positive. Make sure you see good bases with powerful support not too far underneath the price of the stock you're getting it at. Great support meaning a followed, moving average, such as the twenty of 50-day moving averages.

Also, and this is really important if you can get it, a gap right near those moving average support levels. The combination of gap and moving average support close together raises the odds that a stock will be able to deal with selling far better than other stocks without such support. This is the time to be very selective in what you play and when. There are clearly times when you can throw the dart and be successful. This is NOT one of those times so lose the greed and find the right set ups. If you can't find it you may be best to stay in cash. Harder selling will kick in at some point so try your best to play with more focus on your set-ups.

The bull-bear spread came out today and what can I say. The numbers just aren't changing very much at all but they are not in the red flag territory on the actual spread but they are raising a red flag in terms of the number of bears. A 29.9% spread is still far enough away from 35% to allow me to feel good enough, but the fact that we now have three consecutive weeks of bears under 20% isn't exciting at all if you're a bull. I guess the only positive being it's now at 19.6% or up one percent from last week's reading. I would love to see that number move up well in to the twenties, or at least over twenty percent, but that has yet to take place. Just another reason to play as I advised above.

The S&P 500 is only two-plus points away from the old closing high and fourteen points away from the old intraday highs. Maybe the market wants a tag of those levels before giving it up on a deeper level. There's just no way to know. The bears need consecutive gap downs that hold to turn the tide against the bulls. They had the first one today, but lost that as the day moved along so they still have a lot of work in front of them. They need to start from scratch once again.

For now the story remains the same. Bull market in place with higher risk based on overbought weekly and monthly conditions. Proceed appropriately.

In other words, it's forced market participation by the masses. With no other place to get growth, he's forcing everyone in to the market in order to keep the economy growing. It's very slow growth to be sure but growth nonetheless and that's all he cares about. With all of this in place, the bull market, interrupted at times by pullbacks, should continue on. Only when he says the liquidity is about to end and only when he says we're about to start an interest rate hike cycle will the bull market quit. All pullbacks, therefore, are buying opportunities for now.

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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