Stock Market Rolls Along...

Stock-Markets / Stock Markets 2011 Jan 15, 2011 - 06:19 AM GMT

This is one nasty bull market if you're a bear. There has been no indication that things are about to fall apart from just an overbought perspective. This market definitely needs to sell, but it's just not finding any catalysts at this moment in time. Just the way it is folks. I am expecting this correction but I will not try to time it. That's why I stay long and refuse to short although that's the sexy thing many are now doing because we're due for a nice selling episode. You never front run something you believe will happen. You wait to see the reversal, or you stand aside and stay cash, but you don't run in short just because we're due for something on the down side. This game is so incredibly emotional, and I fully respect everyone wanting to be part of something special, but you have to wait for the market to show its hand and allow yourself to miss the first part of a move so that you can then play more appropriately.

The more you play against what's in place the greater the losses you'll likely incur. Again, it's the greed process taking over. You want to make sure you get everything possible out of something. You respond with your emotions and end up moving out of the plays once the losses start adding up. Then, just to rub salt in the wound, the market finally does what you expected, but now you're too nervous to get involved. Bottom line is that the market is still in full bull mode and needs a reversal lower to unwind very overbought oscillators. But for now it's not too anxious to do so.

There are places where things are starting to act a bit more from a corrective point of view. Gold and silver are in correction mode. For now it doesn't appear to be more than that although you never know. SPDR Gold Shares (GLD) closed below the 50-day exponential moving average by more than any time since the up trend began five months ago. It did so on higher volume as well and that's never a great sign.

In addition, two massive froth stocks, Walter Energy Inc. (WLT) and Alpha Natural Resources, Inc. (ANR), both swooned lower on huge volume today on a simple downgrade. Just gigantic candle sticks lower. Full candle sticks as well on that big volume so there's trouble there now. A few stocks each week are starting to act more from a bearish perspective, but for now, the whole market is hanging in well, especially now that the financials have a real bid. Red flags are adding up some, but again, nothing bad. The good news is that while some stocks, or some sectors, are starting to have trouble, the market is simply rotating those dollars in to other places, which is what good bull markets do.

The market is looking long and hard at those earnings reports which will now be coming in fast and furious. We heard from Intel Corporation (INTC) and JPMorgan Chase & Co. (JPM) from last night and this morning respectively. Both came in with solid numbers. The market seems to be waiting on just the right bad news to get things rocking lower to begin a correction to unwind. Earnings are likely going to have to be the place the bears can find something to hold their hats on. Or will it? A lot of stocks are priced to perfection, but many are clearly not as they've been able to move higher on good news from their earnings report.

Next week we hear from some major heavyweights. On Tuesday we hear from Apple Inc. (AAPL), International Business Machines Corp. (IBM), and Citigroup, Inc. (C). A huge day for sure. On Wednesday we get news from eBay Inc. (EBAY) and Goldman Sachs (GS). Thursday we get insight from Capital One Financial Corp. (COF), Freeport-McMoRan Copper & Gold Inc. (FCX), Google Inc. (GOOG), Morgan Stanley (MS), Intuitive Surgical, Inc. (ISRG), and Unitedhealth Group, Inc. (UNH). To finish off the week we will know the stories from General Electric Co. (GE), Schlumberger Limited (SLB), and Bank of America Corporation (BAC). A huge week, and yes, the bears can have hope that some will implode, but if the news continues to be solid, the bigger picture looks bright for the market, even if it sustains a strong correction. In the end, it's always about earnings.

The 1257 to 1262 level on the S&P 500 remains very powerful support when some selling finally kicks in. 20-day exponential moving average along with the 1257/1262 gap that the bears tried to get through recently but simply could not. We're approaching price resistance at S&P 500 1300. With the market so elevated short-term, I would think 1300 SPX will be tough, but even if it isn't, the risk is high. Thus, I'd feel bad if I didn't warn all of you about getting too involved with froth stocks. You know who they are. You must be careful as we saw two of the most frothy of froth stocks in Walter Energy and Alpha Natural Resources get destroyed today. You don't need that experience, so simply keep it appropriate.

Have an awesome 3-day weekend. Make the world a better place by helping someone just for the fun of it. Also, play with a child if you get the chance. You'll feel much better about everything.

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 constitutinginvestment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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