It is so interesting to watch how rapidly something can happen within the machine known as the stock market. It wasn't very long ago that the bull-bear spread was 46%. Bulls themselves we're at 61%, an incredibly high number. This morning, based on last Friday's market close, bulls were down to 41% with the actual spread down to 24.4% from 46% in basically a month or so. Amazing how fast fear can take over and cause those bulls to change to either agnostic or outright bearish. Fear is the toughest emotion all stock-market players have to deal with.

The thought of losing big money is always on the minds of every trader, whether they'll admit it or not. Once things stop going well for even a few weeks, they run scared and change how they feel about the game allowing the spread to unwind rather rapidly. This unwound faster than I even thought it would. This doesn't mean that the market is done with down side. Not by any means. That said, we're no longer in even the first danger zone area of 30% where simply a red flag goes up. With this week's action thus far one would think the number will rise again some next week, but it's great to see how fast things have gone from being far too bullish back to neutral. Some additional selling in time would be great in that the spread would move in to the teens but for now, if you're a bull, you have to be very happy with this unwinding.

The market is starting to show more strength now due in large by the sentiment aspect just talked about, but also by the fact that the bulls were able to create some very nice gap ups along the way towards the back test of those lost moving averages. When you back test in a bearish environment, you do so without gap ups. Just a slow grind up with flat or slightly down openings. Again, no gap ups to speak about. That said, this wasn't the case with this move up off the lows. It was about a few gap ups, one in particular quite large. This creates some technical strength back in to the favor of the bullish camp.

Gaps are huge in this game as you all know very well by now. Put multiple gaps together back to back and you have something to feel safer about. This is the current problem for the bears. This takes away their aggression they were so happy about just a week or so ago. Now they have to deal with the bulls who will try to defend all moves down towards those open gaps. It can be done, but they'll need some bad news to get rolling again. For now we're seeing the effects of those gaps as the market is staying mostly overbought on the short-term charts. We're in somewhat of a stalemate but the advantage for the bears has disappeared short-term.

For now some exposure to the long side makes sense. I like to stay away from the short side until you break down and properly, more bearishly, back test lost moving averages. Stay with the overall trend until that occurs would be my best advice. The market still has lots of risk. Often, but not always, the bull-bear spread has to reach down well into the teens before things become very safe again once you've gotten as complacent as we had. Don't let your guard down. Be appropriate. Make a little here and there and outperform without greed. It's the best way to survive this beast.

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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