Stock Market Still Grinding Higher.....

Stock-Markets / Stock Markets 2010 Mar 18, 2010 - 02:07 AM GMT

Amazing to watch the most overbought market in seven years continues to defy the odds. RSI's along with the combination of stochastics printing numbers you just don't see very often and more than that stay at these levels for so long. RSI's on the 60-minute charts today reaching 80 across the board before pulling back later in the day. The daily charts still have grossly overbought oscillators as of the close of action today and some way or other they will have to be worked off. Not worked off to oversold but worked off to at least not overbought. In bull markets the oscillators stay up for very extended periods of time without getting oversold. 60-minute charts will flash oversold again and again but not the daily charts.

If you look at the major index charts tonight, you will see stochastics have been over 80 for roughly six weeks and above 90 for roughly four weeks. That's unusually high sure but you'll still see the oscillators stay up there much longer than you'd think. Stochastics rarely fall below 50. The same can be said for the RSI's. However, 80 RSI's and 95+ stochastics will need to fall some before we can get any further appreciable upside. If that upside does happen before we get some selling, we're back in 1999. Always possible for sure but I'll take my chances believing we're not and hopefully we're not as well. We all know how that ended. Some relief is seriously needed and I think we'll get it shortly.

Now we do need rest but the market, although it closed off the highs fairly nicely, but it still hasn't printed a true topping candle meaning a gap up black candle or on balance sellers once we gap up for the rest of the day or a print of a Doji candle meaning the sellers have finally caught up. we gapped up and ran today, pulling further away from Sp 1151. The bulls wanted this badly so that when we do sell, 1151 will act as powerful support.

We ran slowly higher all day and then sold off about half the gains late in the day. Still, the Nasdaq closed well above the open thus no Doji or black candle yet meaning it may try to grind higher still and get those RSI's back over 80. Not healthy but it is what it is. The Spy also closed decently above the open even though it closed off the highs. No real topping candle printed yet although we're so overbought we can pull back at any moment. Bottom line is today was a great day for the bulls in that they put 1151 further away and now it can act as support.

What is catching my eye more than anything else these days is the way earnings reports are coming out. After hours tonight we see Guess? Inc. (GES) and Nike Inc. (NKE), two retailers, out with great numbers and their stocks are being rewarded, even though they've already run up. Normally, when things aren't great, stocks will run up ahead of their earnings and then even if their earnings are great, the stocks will pull back. That is clearly not happening now and this too is a sign of a major bull market in place. Earnings are much better than expected but it's from an old trick of CEO's low balling future earnings and then easily beating those numbers the street is now expecting. Hey, it works. What's happening now is that these companies are now beating very easy comparisons thus their stocks and the stock market is rocketing higher.

I'm not sure how much this market will sell when it finally kicks in but I can tell you it shouldn't be severe. So many great handles are setting up all over. Sector by sector is seeing this set up. Handles can drive you a bit crazy at times but they are setting up and one by one they break higher. These handles are what tell me the market will not tank. No shorting for sure unless you like to dance through rain drops. Some can do it but it's not easy. Buying individual stocks on weakness is really the way to go.

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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