For a few weeks now we have been watching the earnings pour in from every sector imaginable. Every leader under the sun is being put to the test. Pre-market. Post-market. A barrage of earnings is hitting Wall Street. It becomes overwhelming, but it is necessary to follow the yellow-brick road of reports because it hints at what the market action will likely be for the next few months. There are always countertrend moves within that time frame, but it's important to know what to expect. You ask yourself the big question of what did the market think of the reports overall. When you study the plethora of reports out there, the market doesn't seem all that disappointed. Sure, there were many bad reports along the way. The usual amount of real slaughters, but on the other hand, the number of good reports, especially from the leaders, seem to outweigh the bad.

Even Apple Inc. (AAPL) was rewarded on a warning simply because it wasn't as bad as feared. The market traded evening to evening and morning to morning based on the number of good to bad and bad to good. In the end, even though they're not done, the market held up very well while trying its best to do some type of oscillator unwinding. Lateral is not bad when you consider where the market was before the earnings season began. There's not a bull in the house that wouldn't have taken lateral considering that earnings had the chance to give the bears some much needed nutrition. In the end, the markets held up well with a new catalyst now needed for the bears to make a big move to the down side. Earnings were their short-term big chance but that seems to have mostly passed them by. Now they need something else and that something else can always be out there so never let your guard down. That said, the bull is still in play for now.

There are minor headaches. You know the story well enough by now. We have oscillators that are unwinding but hey, it wouldn't be a terrible thing if they unwound a little further. We have some bull bear spread issues at 32%, but it usually needs to get above 35% to hit the market hard although you can get strong pullbacks from even 30%. We will get the new readings next week so we need to pay careful attention there and hope that this week’s back and forth put the number down a drop. If we can get it even a tad below 30% I would be a whole lot happier. That said, you can still buy new set ups as long as those set ups are off nice bases with oscillators unwound on the daily charts. It's not as easy to get away with buying high 60's RSI's any longer. They can work, but they won't come easily. Spend time studying those 60-minute charts and make sure they're unwound as well as knowing where there's solid support on the daily charts. So yes, sentiment is not great, and neither are the oscillators, but they're not on sell signals. So yes, tougher here but you can still add on weakness.

There are lots of reasons to be bearish if you look at history. PE's are getting high. The long-term length of the overall bull market. The list can go on and on. High oscillators and the potential for negative divergences on the weekly charts. All true but you know what? One strong impulse up from here and those divergences can be taken out. The reasoning for things is clear. The market is staying bullish longer than expected because of the Fed. It's really that simple. If you use history alone you would have been annihilated a long time ago going short. Never play history. EVER!! Play what you see. Play price action. play protection such as the fed is offering up on a daily basis. Wait to see the classic signs of a new bear forming. Distribution volume, etc. You know the story by now. We're just not seeing any of the classic signs of trouble yet. When we do I'll let you know, of course, but for now, remove history. Stay in the present. It says the bull, like it or not, is still alive and kicking.

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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