The market made the move over 1470 on the S&P 500 this week and now it appears it will use that level as support on any back test to unwind overbought conditions. It tried quite a few times over a two-week handling period to get through, but finally made it yesterday. Actually, it was a shorter amount of time than usual in a handle. We saw the market work off overbought conditions on the short-term sixty-minute charts today early on, but as the day moved along, once things cooled off a bit, the buyers came in again. It was a decent day even when you had stocks like Intel Corporation (INTC) and Capital One Financial Corp. (COF) warn on their earnings reports. There's just not much out there to hurt the markets right now other than unwinding phases from overbought.

With our political leaders voting to move the debt ceiling back a few months, the pressure is off a bit on that front now as well. The market apparently has its head down and wants to reach resistance, which I will discuss in a bit. If that gets taken out, who knows how high this can go. What we do know in the moment is that the bulls are in total control even though things are up towards overbought across the board on even the daily charts. Not quite there yet but getting incredibly close. The market seemingly wants to tag that trend line before taking a deeper breath to unwind. You can't know that for sure, but it does seem to be acting that way. We'll know a lot on that early next week.

Keep in mind that overbought, even on the daily charts, is not a sell signal. It's an impending pullback signal, but you never know how long you're going to stay overbought. If things get frothy enough we can stay overbought for weeks. It has happened quite often in bull markets, especially when it's about to top out from too much bullishness. It's the blow -off phase, and we may be entering that right here. Those who missed out want in, thus, it gets very frothy very quickly. There's too much money trying to get in to kill the market even when it's overbought on those daily charts.

Finally, when all are in, the market bursts and the selling is on, but for now, we are seeing a market that's bringing the late money in. Those getting in here may be doing so kicking and screaming, but they're finally getting in. That's when you get on guard for the top. Not a permanent top but a top for the short to mid-term. Once it tops out you need an extended period of sentiment unwinding. It takes time to get folks a little pessimistic again, so it'll likely be months of handling and unwinding, but that's probably still down the road a bit.

The trend line that runs at the top of this bull-run is currently at 1500/1510. It can be taken out to the up side, but there's no way the bears don't throw everything they have at that trend line of massive resistance. To allow that to get taken out would be a disaster to them. The market could run all the way up to the old highs near 1576 if they give that up, so expect war at that level. It appears to me that the bull-bear spread is about to tough the strong red-light area of 35% more bulls than bears. That's not necessarily the level that has to crush the bulls, but it historically has been a very powerful red-light reading for the move higher in the market.

You know you're close at the very least of being at a too bullish sentiment top. In addition, if and when we get to 1500/1510, the RSI will be 70, or a little higher, on all the important index daily charts. Not a good combination for sustainable additional upside action. So hopefully we ride this move up to 1500/1510 and, if and when, we get there we watch for a topping stick. All in good time. For now, stay long but recognize that each point up takes us closer to the trend line top and to 70 RSIs.

Have a good weekend.

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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