For now that's all it is, but the question is will it become more or will it be just another drop of selling that gets bought up by the bulls. The answer to that will be answered to some degree early tomorrow. We will watch those futures overnight and they should give us some insight as to whether we're getting follow-through or not. The bears need to get rocking with some momentum now. The longer they wait to hit the market the faster the bulls react to buying any weakness.

Once the bulls start buying the bears step away, so it's another test for those bears who need to get moving now if they want to stop this momentum for at least the very short-term. It seems as if they're not anxious to pounce as that strategy hasn't worked so now we'll get yet another chance to see if now is the time that bears will lose the fear and step on it. They need a big gap down that does NOT get filled. If they can do that they're officially in business. Until then it's just another small-selling episode to unwind overbought conditions on all the short- and mid-term time frame index charts.

One very important stock to follow along with is Apple Inc. (AAPL). If the stock can clear the 444 gap with some force it will be on breakout and has a shot at moving to 470/475. If AAPL were to do that it would once again put pressure on the bears as AAPL is very heavily weighted, and thus, would carry the Nasdaq higher and likely take the rest of the market up with it. It gets very tough for the bears when very heavily weighted stocks break out. They can at times single handedly carry an index and that's exactly what the bears don't want.

AAPL had touched 445 today, but fell back towards 443 at the close, thus, no break out at this time. It is important to follow along, however, as it didn't fall very much at all when the Nasdaq fell well off its intraday highs. Normally a very good sign for a stock for the near-term, but there's no guarantee it'll ever make the move. The bears will be watching it very closely to be sure. As AAPL goes often so goes the Nasdaq. AAPL on breakout is basically the kiss of death for the bears. The next day or two will be very interesting, for sure.

The big question being asked is why won't the market fall with it being so overbought? Overbought after a while also coincides with sentiment ramping up. Sentiment is on watch this Wednesday. We will likely be at the red-flag reading of 35% bulls to bears on the spread. When you get to 35% you think about reigning it in a bit. When you go above that you reign it more and more with each percentage point up. At 40% you're looking at market trouble, and big trouble the likely outcome. Pullbacks off 40% spreads can be severe. Far greater than anyone thinks possible at that time. You think about how the market basically always hangs in there, thus, naturally the next pullback, small pullback in fact will be bought like all the others. Then that stops happening. It doesn't get bought.

The market spirals lower as all the bulls are in and there are none left to buy. The selling can be as hard as 10% or more. So we watch the figures this week which will likely only get us to the red-flag zone of 35%, but increasingly closer to the out of the market 40% zone. This is the ONLY thing the bulls should be focused on right here. Nothing else in their world is relevant. So, while things are fine for now, do recognize that trouble is creeping ever closer to the world of the bulls in terms of sentiment. Wednesday's reading will be more than interesting. For now, some exposure on the long side remains appropriate.

Have a nice weekend.

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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