The bears have dreams. Oh, to see those levels get eaten away one by one. Fantasy is nice, and maybe someday it'll come true, but for now it remains a dream unfulfilled. Everyone keeps talking about market death these days, and we certainly could use a longer down trend to unwind all of the bullishness from this market, but no matter what happens, we can't even seem to take out horizontal support at 1335 on the S&P 500. So let's go over the headline title here.

1335 is long-term horizontal support, 1326 is the 50-day exponential moving average, and 1315 is the long-term uptrend line, which separates this market from a heavy pocket of selling. That is the ultimate last line of defense. Notice how close together these support levels are. This is what makes the move lower so seemingly tough for the bears. Getting through 1335 puts the bears up against the 50-day exponential moving average, and then that long-term uptrend line. All within one and a half percent from top to bottom. The closer the support levels are to each other the tougher it is for the bears.

This bull market has been so strong that it has created a lot of protection for the bulls. When things don't happen quickly for the bears they tend to give up quite fast. This allows the market to hold critical support over and over again. For now, we have to recognize the chore that exists for the bears, and only when they can show they have an advantage can you start getting more on the bearish side for the short-term. For now they've shown and done nothing. Trying for sure, but they've accomplished nothing. The story is yet to be written as the bulls are struggling more near-term, but for now the market remains quite bullish with, let's call it, headaches.

The headaches for this market are clear. The weekly charts are atrocious on the main index charts. You have strong negative divergences with lofty oscillators well above the zero line, which is never a good thing. We also have sentiment problems, although they're not as bad as they were one month ago. The bull-bear spread was 41.6%, and now it's down to 32.6%, a healthy 9% improvement. Not bad at all, but still a long way to go to get to levels that allow markets to blast higher over time. These levels allow for upside, but not major upside. However, if you want a market to move much higher down the road, it's much better to get the bull-bear spread down to 25%, and then, hopefully, to the upper teens. These are the types of problems that over time can cause a decent pullback of 10%, or more, but never a guarantee. The risk, however, is much higher now for some form of a real pullback that can last for weeks, or even longer, so beware of that.

The commodity stocks took it on the chin once again today. A big slaughter throughout the commodity world. It didn't really matter where you were in that space. If you were in you took a beating. The problem with today's move is that many of these stocks within the commodity world had cleared back over their 20- and 50-day exponential moving averages only to see them lose them today on increasing volume. This type of behavior can be more longer-term in nature now that you have the reversal right back down. It's a bearish sign. iShares Silver Trust (SLV) back tested its lost 50-day exponential moving average and gap resistance at the 38.00 level, and fell very hard. Classic, more bearish behavior for a broken sector/bubble. When bubbles break it can be very severe. No way to know for sure if it's totally broken, but the iShares Barclays Aggregate Bond (AGG), or ETF for silver, was down over 50%, or 200 points, in just 5 trading days. That's a broken bubble for sure. We'll just have to find out in the weeks ahead if SLV is dead forever, or not. The rest of the market wasn't bad, but sold off some. The financials were dead, as usual. Stay away from those stocks.

So now we have the market trying to move lower, but holding key support. We also know the risk is higher by far than it has been for quite some time. The biggest culprit, in my opinion, are those really nasty looking negative divergences on the weekly charts. It suggests that cash is a very powerful position for the time being, and if something sets up to the short or long side it can be played, but really you should think about lots of cash for now. Remember that shorting a bull market is not an easy task to get away with. Lots of bounces in a down trend. That can play on your head. So, if you short, keep it light. It may even best to avoid three time plays and the like. 1315 is the line in the sand for the bulls to defend. If that goes, it's lights out for some time, and believe it or not, that would be best for this market in the long run.

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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