Folks, to be honest, there's not much to day about this market that we haven't discussed repeatedly for weeks, if not months. There are a number of issues the market is facing that one would think would be the beginning of the end for the bulls. We have overbought conditions on the key-index charts across most of the time frames everyone uses in one way or another. We have some divergences around, and most of all, we have froth at extremely high levels that usually knock the market down in a very large way. Not just your casual 4-5% correction, but levels that can cause bear markets meaning at least a correction of 20% or more. At times, 50%. Yes folks, the froth readings are that bad.

That said, the fear from Ms Yellen has allowed the market to hang tough simply because folks have almost literally no other choice when it comes to where they are going to put their dollars. We've never had to deal with this type of situation and how the market would react to it. We are learning as we move along and thus far the market is hanging strong but that doesn't mean we have removed the risk involved with this type of froth situation. Let your guard down and you could pay a very difficult price financially. All this means is you keep a little scratch in the game but buying some weakness here would be a very good thing for the market. Unwind those relentless oscillators on many of the time frame charts and things would be a lot safer.

It's too bad with regards to froth. We were at 30.3% on the spread just there weeks ago. 30% is the first red flag marker. How great it would have been for continued market, which would have knocked things down very quickly in to the low twenties if not the teens. A beautiful thing for the bulls. It took just a couple of weeks to knock things down from slightly over 46% to 30%. The fear was ramping fast as the market pulled back 4%.

Another 3-4% lower and we would have been golden. Not to be. Now we're going to be back near 40% when we get the new numbers next week. You wonder how many tests up near 40% on the spread the market can handle. At some point, of course, we will see the teens again, but no one, and I mean no one, knows when the deeper selling, the more relentless selling, will finally kick in. Respect the potential, but keep some long scratch in the game without playing froth and you should be fine. New highs can always be made again, but any new high will just simply create a deeper correction as froth ramps higher still.

Peace and have an awesome weekend.

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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