So we finally got some news that would help the market take a deeper plunge. Well, not exactly a deep plunge, but the early futures last night suggested we may see some blood on the streets today, the futures down 140 points on the Dow, nearly 40 on the Nasdaq, and 20 on the S&P 500. We had the makings of something to help us really unwind those overbought oscillators on the daily, weekly, and monthly index charts. The futures recovered a little bit pre-market, but we were down approximately one hundred points early in the day with the Nasdaq down over 1%. Now the question became, once the retail crowd bought up the early dip as usual, would the market head down late in the day? The answer was yes and no.

Unfortunately for the bears, they couldn't get the market rocking lower late. However, the bulls couldn't get the usual green candle stick late either. The bears helped things change character, even if just a bit. Not a day of celebration for the bears, but a day of at least saying they could do something they haven't been able to do for many months, and that's to sell things a bit late, even if it was just with a little bit of force. Maybe this change of trend will allow the market to continue selling for a while longer. We can only hope as this would be very good news for the stock market. We desperately need some selling to unwind more deeply so we can hope that today's slight change of trend will lead to more selling in the short-term.

Getting a market to fall from high levels, even extreme levels of overbought across the many different important time frames, can take a long time. You wonder why it simply won't fall hard for a while. It makes sense after all. The problem is the small retail player. Understand that in a bull market you're not going to see big money sell things off very much as they're looking to hold longer-term, or as long as they think the bull will move along. However, they also know when to stop buying when things get too overbought. The not so smart money, or the retail trader, wants to keep buying at all times. Get in while the market is strong, thus, they don't allow too much selling initially. They buy up the dips, much as we saw again today early on.

However, at some point in time they finally give that up when they see it takes more and more to keep it up. Only when the retail trader gets a little frustrated, because things don't go up as easily for a while do they give up, which eventually allows the market to have its unwinding pullback. It's possible that started today on some level, but we can't know for sure yet. The next few days will be telling. Getting another 2-3% down would be awesome in terms of getting new plays. We'll see if the market can give something up for a while. It would be helpful for the bulls, even though they won't like the way it feels when things sell.

Some of the sentiment issues are still in pretty bad shape, although keep in mind that none of them are in bearish shape. Just red light warning shape. We do have too few bears. 18.8% is not good. The report this Wednesday may actually show even fewer than that as last week wasn't bad. It doesn't take in any of the action from this week. It's possible that bears will be lower still and running too far away from 20%, which is the area one looks for when wondering when the bears are too few in nature. In theory, we are going to need to have fear move up in the market in order to get the bears rocking back in.

Staying under 20% for long periods of time just isn't what you normally see. With this in mind, it makes you play the market from a more safety first approach as you know that at any time things can fall hard in terms of price. It doesn't mean to short and it doesn't mean you can't have some long exposure. It simply means to keep things appropriate and understand the risk involved. We saw many leaders take big hits today. Priceline Inc. (PCLN), Google Inc. (GOOG), Equinix, Inc. (EQIX), LinkedIn Corporation (LNKD), Amazon Inc. (AMZN) and many others took big hits down today. Try to stay away from too many heavy beta plays.

Keep it light. Know the risk involved. One day at a time. Let's see if the bears can follow through here in the days ahead. If they can, they'd be doing the bulls a big favor for new set-ups.

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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