When you watch price action near critical levels of resistance you want to see how it holds up, even if the short-term charts are at or near overbought. Watching the action today with those short-term sixty-minute charts near or at 70 RSI it has to give the bulls some comfort due to the fact that the bears couldn't pound the market lower the way they have been in recent weeks whenever the market went to these levels on the oscillators. The market tried many times today to sell off, but the bulls made sure things held up well enough. A change of character for the short term.

It does not guarantee by any means that this will be the behavior come early next week, but all we can go by is what took place today in the face of these overbought conditions. The bears have to be feeling the pressure here. They know if we take out 2119 with force on a closing basis, things could get very rough for them. They will be forced to cover some of their short positions, which adds fuel to the move higher. The market is at the precipice here. Things are getting more than a little bit interesting. The bears need some good news for themselves or they'll be depressed by early next week is my guess. All that said, never get complacent. The market can change its stripes in a single moment. The bulls still haven't accomplished anything significant.

Now that the market is hanging so close to breaking out with force, you look below in case we pull back some from overbought first, meaning where is it fine for the market to sell to without breaking down below key support. If the S&P holds above 2103, or the 20-day, exponential moving average that would be solid. 4995 the level on the Nasdaq. We don't have to pull back to those levels first before breaking out, if we do break out that is, but those are acceptable pullback levels to unwind if the market needs to do that.

If we start closing below those levels on a closing basis with a little force it puts the entire breakout thesis in doubt yet again, so those are levels for you to write down and watch in the days ahead. Market can get overbought and stay overbought on the short-term sixty-minute index charts far more easily, if the daily charts themselves are not overbought and that's the case here. The daily-index charts are nowhere near overbought on any of the key oscillators, so there's the possibility of getting and staying overbought although that hasn't been easy lately as I've discussed. Just that the possibility is a bit greater for that to occur. We shall see but watch those key levels on the S&P and Nasdaq.

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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