The market continues its dance with higher prices while the bears sit on the sidelines wishing they could partake in the festivities. Just not meant to be even though they have reasons to expect better times, but more on that later. The market tried to sell today a bit, but the bulls refused to let things get out of hand. The Nasdaq 100 slightly under performed today but that's not bad since it has outperformed so much lately as the heavily beaten down stocks are finally getting a bid from severely oversold conditions. The reason for the under-performance today was the large reversal from Apple Inc. (AAPL) as it went from up near points to down a couple when all was said and done. I guess even AAPL has to take the occasional vacation from upside action.

With the market trying higher to some degree just about every day we are now starting to see some major index and sector charts getting very stretched on price and oscillators so we have to be more on guard for at least your normal pullback, but there are still no signs of the big correction many are waiting for and have front ran only to feel the pain of playing that way. I can understand their thinking but you need to see evidence of a reversal, thus, for now, the overbought sector and index charts may pull back some, but that does NOT mean we are starting the bigger correction most seem to waiting on. If the pullback off the top is not impulsive on the oscillators it will tell us to expect even higher prices after that. Never argue with what those sector and index charts tell you, even if it makes no logical sense to you. Go with what you see, not what you feel should be.

So what would be the one thing that tells us that the uptrend is ending and is ready for something large to the down side? You need a large gap down that runs lower all day and closes at or very near the lows. Then, after possibly going flat for a few days you get another large gap down that runs lower and closes at or near the lows for the day. If you put two large gap downs close together in time that remain wide open the odds are extremely high that something nasty is brewing and that the bears will finally have some fun for a while. Without that process it'll be hard for the bears to gain any momentum to the down side with any force. One large open gap would cause the bulls some headaches, but it takes that second open wound to really get the bears active and acting fearlessly.

So, yes folks, we have nasty monthly and weekly charts on both divergences and extreme levels of overbought on those index charts, and, yes folks, we have terrible news on the sentiment front, but in the end it's all about price. If we don't get those multiple gap downs you simply stay slightly long and wait for the market to tell us when it's time to go cash. Don't front run. Don't anticipate. Act ONLY when the market tells you to. Emotion can cause you to make moves that won't help your bottom line. The headaches are there but so are extremely low rates which is the major weapon for the fed and the bulls. Plug along but be smart. React to what the market does. For now we're still above key support at 1897 and 4204 on the S&P 500 and Nasdaq 100, respectively. 4204 is the top of a very strong gap up. 4186 is the bottom that strong gap. The bears have their work cut out for them to be sure. Day to day as we watch and wait for signals.

For now the only signal we have is a grinding higher market.

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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