This is common in bull markets, especially when the market won't sell off when everyone is expecting it to. We are overbought. We do have some negative divergences on the daily chart and we do have eroding sentiment figures. This equates to pullback. However, when a market can't sell when it supposedly should, the bears start to cover and the bull get braver and thus later day action becomes one in which markets move upward. Sort of the give up affect. It's a bull market. It won't sell on a given day thus the masses move towards the direction of the trend and simply buy equities. Today we had weaker futures to deal with due to poor earnings from Microsoft Corporation (MSFT) and Amazon.com (AMZN).

As usual, the futures recovered overnight and thus opened flat instead of with a big gap lower. We then did start to move down some, led by the Nasdaq only to see the usual buyers step in as things started to sell. The day ended with the market closing basically on its highs with decent internals as per usual. Solid overall action in to the teeth of lots of red flags for the near-term.

One of the really interesting things going on in this market is the clear changing of the guard and the power of this bull. Think about this folks. Goldman Sachs Group (GS) was down 25$ in a day on horrific news and the market sold off a whopping 1%. We had horrible earnings from MSFT and AMZN on the same night, and they were crushed the next day, yet the market went higher. That is a near miracle if you think about it. What is happening is a new rush of new stocks are getting their day in the sun as growth explodes for them. The market now looks beyond the old guard stocks and can respond to how the new guard is behaving and growing.

Gone are the days when GS, AMZN or MSFT had bad news the market would get destroyed. Not now. Not in this bull as the growth is so wide spread in so many different sectors that the market can handle some set backs and march onward and upward without the bad players interfering with the rend in place. This is the sign of a very healthy market. It is so interesting to watch an evolutionary change take place that is permanent. It's so good when a market can say we no longer will depend on stocks that simply had their day and can no longer grow at a pace that equates to much higher prices. Good for the stock market in general and particularly good news for the bulls.

Commodity stocks seem to be getting the best bids right now along with financial's. It's interesting because the commodity stocks seem to be indicating that growth will continue on a global scale, whether the masses believe that's possible or not. The message seems to be that inflation is the worry of the day as demand increases. These stocks are being priced as if growth will be continuous and not just a one time affair. The result from this in time will be the fed having to start a rate increase cycle that I believe the market won't like initially but will love later on as it indicates that sustained growth is upon us and thus a robust economy will be the normal way of life again. If you believe that fundamentals lead the stock charts, the message of the market seems to be good growth ahead but with the usual headaches of inflation mixed in, just to make things more interesting.

The market did what all good markets did. The major indexes back tested the 20-day exponential moving averages as things unwound but that's all the selling the bears could muster up or the bull would allow, depending on your point of view. Probably both are correct. The bulls know that buyers will be waiting on those back tests. the money came in as it should when the S&P 500 tested the 20's at 1187 (1190 low).

So far so good, but we all know at some point deeper selling will likely take us below the 20's, down to the 50-day exponential moving averages where it will be buy hand over fist time but that's for another time down the road of this crazy but interesting bull market. With the market defending the 20's, even in to the teeth of the short-term headaches already discussed in this letter, is it possible it can grind higher? we all know the answer to that but we all have to be on guard for the inevitable selling that will come. For now we stick with the trend and play stocks at appropriate levels of support and when their oscillators have unwound enough to warrant entry.

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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