It's hard to believe it's stable, but that's what the market is doing, and showing the ability, for now, to fight through all the negatives that abound for owning stocks short-term. The strong negative divergences alone are reason enough to pull this market down hard. Add in overbought daily, weekly, and almost monthly charts and the bears have little to no excuses left. These types of set-ups often cause market turmoil that allows fear to shoot up in a big way. Instead, the VIX is falling to new lows. With so much going for the market fundamentally, such as Mr. Bernanke adding liquidity and keeping rates low, it's finding a way to hang in tough.

Add in an improving job market and an improving manufacturing sector, things are holding well enough fundamentally to keep the technicals at bay for now. The market will have to get smoked at some point as the rubber band can only be stretched so far. There are reasons why the market is fighting the technicals that are screaming a move down should already have begun. If the economic conditions weren't such as they are the market would have long ago fallen. For now, it continues to show guts for the bulls. The pullback will hit at some point soon, but no matter how you look at it, this run has been impressive. Some selling would actually help it gain more strength. Let's hope we get some soon.

The Nasdaq has lagged for quite some time. The biggest reason for this is one name and we all know that name very well. Apple Inc. (AAPL). It has fallen just shy of three hundred points off its September top at 703. Everyone is wondering where it will bottom. The daily chart has been flashing a positive divergence for quite some time now. Today showed some promise as it tested down to the 425 area, an area that seems to want to hold as support. It has huge resistance at the 440 gap, but if AAPL can somehow clear 440, it can run to 470 over time where the 50-day exponential moving average lives.

Getting over this type of resistance usually, but not always, comes from a gap up. It closed near 438 today, thus, one good gap could get the job done. If AAPL can finally put in a bottom then the Nasdaq can start to outperform the rest of the indexes. It's always best when the Nasdaq leads. No guarantee as AAPL may just be forming a bear flag, but today was encouraging and, thus, an important stock to watch over the next few days. The stock is too heavily weighted and that's the price you pay when that's the case, but a break over 440 will carry the Nasdaq higher instead of lagging as it has for the past several months.

It's funny how a market can set up divergences between the technicals and the fundamentals. The technicals have been solid for a long time, but lately they have faded from positive to a more negative stance. Negative divergences have formed on this last leg higher on the daily charts. Add in overbought on many critical time frames and you have a market that should no longer be trending upward. However, the fundamentals can outweigh the technicals. In this case the leader of the fundamental band is Mr. Bernanke who remains intent on keeping rates so low folks are forced into the market.

Add in the liquidity machine being on day and night and that's tough for the bears to overcome. Lately we have seen better economic reports as well with the two most important reports being the ISM Manufacturing Report and the monthly Jobs Report. Both are improving quite a bit, at least that's how they're being reported, which is all that counts. When people think things are truly on the improve fundamentally, it's hard to keep them out of the market. The Fed is making sure they stay with stocks, so the market keeps trucking along, although at some point the rubber band will snap, creating a large and very needed pullback. For now the market is running with the fundamentals.

Resistance at 1550 is being tested with 1576, or the all-time highs in view. No guarantee we get that high based on things discussed earlier in this report from the technicals, but the bulls seem determined to try to get there. Trend line resistance comes in at 1590, so it's possible, even with the technicals as they are, that we will make a run to the 1576/1590 area. Because risk is now higher than it has been for quite some time, I would still recommend keeping things appropriate. Some exposure for sure but not so much that you get smoked when the selling hits out of the blue.

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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