The market received the news it was looking for this morning. The market was right near the breakout on both the S&P 500 and Dow with great news to move it on through. Didn't happen. The futures blasted up showing a breakout, but they failed as the pre-market period wore on. We gapped up a bit, but the day was not to be kind to the bulls with regards to that breakout. The S&P 500 came within six points of its old high before falling. The Dow came close as well before selling as the day wore on, while the Nasdaq got within a few points of back testing its 50-day exponential moving average. That too was the sell off point. To sum it up, the Nasdaq failed below its 50's, while the S&P 500 and Dow failed at horizontal breakout prices.

That is not the kiss of death, however. The bears would like to say that's the case, but it just isn't true. While the averages failed to break out, they didn't exactly crash down as you often see, if not always see, when something is ready to fail in a big way. Where were the big sellers? They simply weren't there. The chop continues is the best you can say about things. Now, just because we didn't break out nor sell doesn't mean we can't pull back further before trying higher again. The market acted as if it's just resting after a run up to the prior top. While the bulls can't celebrate on a day most thought they would, they shouldn't be depressed over how the market acted once the failure became more obvious. The bears didn't seize on things, so there's still hope in time if you're rooting for a breakout.

Look folks, there really isn't much to add. The script is old and seemingly endless. The bulls try to get a directional move only to have the bears defend it where they absolutely have to do so. Once the bulls fail the bears try to make some noise. They get rolling along, only to have things get slammed right back in their faces seemingly out of nowhere on no news. Why? Because that's the way it is when markets are consolidating long-term moves higher. The fun has to end somewhere. It has ended, to be sure.

We're starting our fifth month of the year with the market flat overall. The bulls should be happy about that as many longer-term oscillators have unwound quite a bit without really any overall price erosion. Impressive to be sure. The market would be best served with a strong correction to unwind sentiment, but we usually don't get what we need. The market is vulnerable. We can only hope we get deeper selling, but you can't play on hope as we all know. With that in mind we keep small exposure in non-froth names. We keep tight stops, and we make sure to be ready when the time comes to get aggressively long. We are still very much in a bull market, but this is the part no one likes very much. Adapt and you'll be more than fine.

S&P 500 1897 is the breakout. Nasdaq 4155 is its breakout. That's horizontal on the S&P 500 and 50-day exponential moving average on the Nasdaq. The Nasdaq remains the weak index by far simply because froth lives there. Froth is not where you want to be, even now. Even after they've been crushed. They back test moving averages and fail all over again. So we watch to see if in the days ahead we can take out 1897 and 4155, or see if the bears can turn things lower and remove the 50-day on the S&P 500. We're quite a distance away for now. It can creep on you, however, very fast if we get one of those gap downs that run. We never seem to get them, but it's always out there lurking for when you least expect it.

For now, as I've said, keep it very light and away from froth and you should be fine.

Have a nice 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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