Stock Market Explodes......

Stock-Markets / Stock Markets 2010 Jun 11, 2010 - 01:19 AM GMT

And so it goes.... Yesterday I saw some strong set-ups across the board on individual charts along with some compressed MACD?s and positive divergences. Figured it was time for the market to go up. Due to poor performance I missed this move by getting shaken out, but ultimately the market did make the move I expected. A strong gap up today on no news that made it trend higher all day with hardly any significant selling along the way. Small pullback's that were quickly bought up as is the norm for such trend days.

The bulls had a fun day for sure and closed just below strong support that can be taken out with one more strong gap up. The 60-minute charts are close to overbought in a big way thus any move near 1100 will cause a small pullback that needs to be watched to see if the market can be bought or not. A close above 1100 would take out gap 20-day and 200-day exponential moving average resistance. If this happens, a move to 1150 is very possible, although there is other resistance to worry about along the way. I'll get to that later. Bottom line is, today was a strong trend up day with fabulous internals that confirmed the move which leaves more doubt to whether the bears are in total control at this point and whether we'll ever take out 1040 on the S&P 500 with any force.

If we can get a move up to the 50-day exponential moving average or 1122 on the S&P 500 that would form a right shoulder that I have been speaking about for quite some time. Always thought we never had that right shoulder in place and that in time we'd get one. Looks like that time is upon us. If we clear 1122 we can get a symmetrical right shoulder at 1150, and that would set the pattern up perfectly, although please keep in mind, that head-and-shoulder patterns are very unreliable. Far from the best bearish pattern the bears depend on but you have to respect this pattern here because its one that has set up over six months. January set the right shoulder and now we're trying to get a right shoulder in June thus again, we must respect the possibilities.

If we do clear 1122, that would put the S&P 500 above all critical moving averages, and although this may only be setting up a right shoulder, you have to also consider the bullish nature of an index being able to clear through the 20-, 50- and 200-day exponential moving averages. That's bullish in its own right. Of course, many times we get breaches of important support or resistance only to see them reverse once the masses get overly bullish or bearish.

The market is far more uncertain here as the bears spit the bit, having had the bulls on their knees. Not unusual, as I always remind everyone that even though price over a long period of time may be lower, markets almost always go higher. It's just that bears are nasty and remove years in weeks or months. It's avoiding the bears that matter the most. Bear markets are also uncommon even though it doesn't feel that way. Again, because they're so hard and nasty, but up is the normal course of the average market.

So, I called it right and played like an amateur. Have to see how things set-up off the next small pullback from oversold on those 60-minute charts. Won't buy short-term overbought again so as to not get shaken out for a second time. Only when the short-term charts get unwound from overbought in the next day or so can I make an informed decision on how to proceed. Just the way it is right now. The market is still range bound between 1040 and 1105. If we blast through 1105 it will have to be considered a bullish change of trend for sure. Now the onus is on the bears to hold the confluence of resistance between 1092/1105.

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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