The market recently tested down to 2119 last Friday on the talk of a rate hike and poor economic reports. We saw the ISM Manufacturing Report and services come in well below expectations. Friday was painful, but the market tested down to 2019, which is still one full percent above the 2100 up trend line of massive support. After a fed Brainard rally on Monday, we saw the market head lower once again yesterday as it touched 2120. A nice double bottom at the lows, which also happened to set up a positive divergence on the short-term only, sixty-minute index charts. The daily charts aren't anything worth talking about from a bullish perspective. They're now more bearish in nature. However, a double bottom with short-term positive divergences usually means, especially in a bull market, that we'll test higher somewhat short-term.

The bulls were not let down early this morning on from that perspective at all, although it wasn't a rousing rally such as we saw on Monday. It failed late however. The bears are more active these days as witnessed by the carnage from last Friday and Tuesday, not only on price, but also on volume and on the decline/advance line which was nearly 10/1 negative. The bears may have to give it up come next Wednesday if Fed Yellen spreads her magic dust around, but, for now, the bears are definitely in fight mode. They're not just lying down and letting the bulls kick them around. Respect the effort, and respect the selling in terms of what it has done to the daily oscillators on all the key index charts. Not great for the bulls at all at this moment in time. It can turn, but it's not great here. Bottom line is today we saw the effects of a short-term set of positive divergences early in the day, but that hasn't turned things more bullish quite yet. Things are still unclear. Also, we closed well off the highs with the S&P 500 and Dow lagging badly. Apple Inc. (AAPL) holding up the Nasdaq.

In the end, however, it will be all about next Wednesday's fed report on interest rates. The question in my mind isn't about whether or not she'll raise rates. To me that's a slam dunk. A zero percent chance in my eyes. The question to me is more about the market's reaction to yet another favorable statement from the fed. Have we reached the point where the market no longer cares about her actions? Will the promise of more free time near zero rates matter any longer? That's what we'll be finding out. The market knows no rate hike is forth coming. The economic reports won't allow for that at this moment in time. If a market is indeed actually topping out, then it will stop responding to the good news that moved it higher for a long period of time. That time may, or may not, be upon us. We can't know. The market will tell us on Wednesday the 21. She may use some words to make it seem like she's still interested in raising rates, but the market has heard enough of her verbal garbage to know not to trust her. She will be a dove, but is this the time when doves cry? Not sure. The bears are hoping and the market is acting as if it may be time for a change. In the end, we will only know by the action in price.

If we lose 2100 on a closing basis it's trouble for the bulls. You never want to lose a very long-term uptrend line on a closing basis. Turns the action from bullish to more bearish. If we blow through 2194 on the promise of more low rates, then we know the next leg up has likely begun, and the bears are once again feeling pain. Between now and next Wednesday, I expect high volatility. Keeping it light. Today's whipsaw action tells you why I am.

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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