Fed Speaks After Hours... Stock Market Looking To Correct A Bit?.....Nothing Bearish....

By: Jack_Steiman

That may be the truth of things as the market seems to be churning around the resistance level of 1654/1656. Markets, if overbought on the short-term charts, will struggle at a particular resistance level. This will allow the short term oscillators to unwind which will provide more energy for another move and test back up. If the oscillators unwind enough without too much price erosion, the market will likely make it through that resistance level in time.

The market is a timing mechanism. Its purpose is to frustrate the masses enough to get them to do something they'll likely regret over time. If you show the necessary patience and deal with the short-term selling you'll likely, although never a guarantee, be rewarded for that patience. Stocks go in to their own world. Like Union Pacific Corporation (UNP). It's great, then not so great, but if you look at it from afar and just look it at, you'll see there's nothing bearish happening. Just rolling up and down in its base. Eventually these bases usually break out to the upside, but you never know for sure. That said, you deal with the whipsaw and over time you should be rewarded. Again, keep in mind that the market has a job to do. It wants you to be emotional. Do your best not to be.

The market came in to today overbought on the short-term sixty-minute charts, but like most bull markets, it had trouble selling with any force. It tried numerous times to sell, especially after the market moved up sharply for a few moments when the Fed minutes came out. The bears were able to push away the gains, but in the end, it was not meant to be for them as the market refused to sell with any force. Yes, the bears didn't allow the S&P 500 1654 level to get taken out, but the close at 1652 wasn't exactly a great job by them. One small gap up and the market is through, and then likely trying for the old highs. We could surely pull back first to further unwind those short-term sixty-minute charts, but the bulls have been in control since they were able to take the 1628 gap of resistance. As long as that level holds strong, and the longer it holds, the more bullish it gets for the bullish thesis to continue on.

A quick go over about how one can recognize when a bull market is ending. There are three factors that come in to play when a market is ending its bull run. First sign of a bear is when, at tops, selling kicks in on what would be described at distribution volume. Big money is selling off tops. Volume kicks in quite dramatically. On the ensuing rally back up there’s very light volume comparatively. Second sign is when good news stops being treated as good news. No matter what hits, the market struggles for sustainable upside action. Great earnings reports get sold. Good economic news gets sold. Nothing seems to be treated well, and more importantly, bad news gets smoked. In bull markets, bad news is mostly forgiven. When things turn bearish, there's no mercy. Finally, it's likely you'll see negative divergences set up. Severe ones at that at equal tops or higher highs. Again, when the selling then kicks in off those divergences, it will be extremely high with regards to volume. A fourth neighbor often plays in the turning of a bull to a bear. Sentiment. You'll find the bull-bear spread reach 35% or higher. Hope this helps you all for your future trading.

Mr. Bernanke speaks this evening. He just said what I have been telling all of you for years now. That he intends to keep "highly accommodative policies alive for the foreseeable future.” He also said he won't be raising rates until the unemployment rate hits 6.5%, or lower, and even then he won't necessarily raise rates. Folks, not to toot the horn, but I have told you not to think any of his fun and games would be going away any time soon. Stop listening to the noise out there. The market action has been telling you this would be the case. Bigger picture, the market will love his words this evening.

So it is written!

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.

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