On Friday we had one those gigantic down days we see every so often on big volume and a horrendous On Friday we had one those gigantic down advance decline line. The type of move off a top that almost always leads to more immediate down side. That is, until we moved from the stock market to the fed market where all seems to be well no matter what is taking place in the real world economy.

It seemed to matter a little bit at least when the trio of bad reports came out, which included Jobs Report, ISM Manufacturing Report, and Services Report. It mattered even more when there was even the hint of a rate hike coming in September, or at least, very soon. The drop on Friday took us seven points below the breakout level of 2134, but the bears just couldn't find the ability to keep the market short-term oversold, and the rally was on. We're back above 2134, and now that this level has been taken back it's clear the bears still don't have the fuel or belief to take this market appreciably lower.

It was there for them, but after we hit 2119 at the open, the buying was on and on in a big way. This leads us to look at the market from a different perspective about which levels matter. 2194 is still the August double top, but now that 2134 no longer matters, we search for the key level of support and it's the trend line at 2100. A move below that on a closing basis would be far more bearish, while a move over 2194 would be extremely bullish on a closing basis as well. When you are playing with a meaningless 5% spread between bull and bear the emotions will only expand. You need to be extremely careful as whipsaw is likely to increase quite a bit. The vix is now also a bit higher, thus, volatility is back to some degree at least. Be prepared for more emotional swings folks. The bulls and bears continue to play tag. No one is winning short-term, but long-term the bulls are in control above 2100. ONLY when that level goes away on a closing basis should the bulls feel threatened that their run is ending.

During bear markets we often see these powerful one to two day up moves that make you think the bear has ended. The Dow up often near 300-400 points with the Nasdaq up a hundred, or so. We are having those types of days now in the bull market. Brexit and Friday saw gigantic moves between one and two days, but in the end the bulls didn't allow for things to go lower. They took back control quickly.

The breadth was so powerful on Friday you had to think it was a slam dunk for further follow-through to the down side today, but it was not to be. After a quick gap down the bulls flourished. This is what we see in bull markets. Still no signs out there folks that the bear is taking over. I actually feel bad for the bears as all the news is on their side in the real world, but in the world of the stock market it's still bad news is good news. Maybe it's bad for a day, but that's it. We don't have to understand it, nor should we really waste our time trying to.

Just accept price behavior and adapt. The environment, due to whipsaw action, is extremely difficult to play. When that's the name of the game, you should probably ease up on playing. Always do what's best for you, but this type of action causes a lot of emotion, which tends to bring about bad entries and exits. Keeping it lighter until we lose 2100, or blow through 2194, may seem tough to do, but it's going to be very hard to play appropriately in between. The huge open spread is upon us. Accept it and you'll be fine. Day to day as usual.

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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