Stock Market Failure At S&P 500 1131...Overall Action Is Bullish...

By: Jack_Steiman

The futures were rocking higher last night. Upon waking this morning those futures held very well, and it looked as though 1131 was going to be left behind once the market opened. The bears had other ideas. The futures slowly started to gather some momentum back down on no news. The bears piling in to knock it down. By the time the market opened, things were green, but well off the highs. That didn't stop the bulls from making one more move back towards that elusive level as the S&P 500 touched 1131.47.

That was the high as the bears held where they had to once again. Too close for their liking, but they did hold the bulls down for the time being. Now, one would think that once the market failed at 1131 it would simply fall apart. Not to be as the bulls let the bears know that they have some air left in their lungs. They spent the rest of the day near the flat line on the Dow and SPX, and up some on the Nasdaq, thanks mostly to Oracle Corp. (ORCL) and their excellent earnings report last night. The bulls feel badly, of course, that they lost the battle at 1131 on the S&P 500, but they should feel pretty good knowing they didn't allow the market to just get slaughtered once that level was held by the bears. In the end, no victory as of yet, but nothing to hang their heads over. They'll come back fighting next week at some point.

The good news for the week has to be looked at from a different perspective than just points up or down on the averages. The best news for the bulls this week was the action in the financial world, especially in the semiconductor world, where things turned around decently from a technical point of view. Positive divergences on the daily charts kicked in and now the Semiconductor HOLDRs (SMH) looks decently healthy instead of dead in the water. Things really looked rough there, but now they look pretty good. This alone gives the bulls hope that we can clear through 1131 some time next week, or just thereafter. No guarantee's, of course, but the action there is definitely a sign of hope for the bulls. Without the semiconductors, or the financials, there is no way this market can move too much higher without ultimately getting whacked back down. A good start.

When looking at a market you want to take time to go over how the oscillators look on the 60-minute charts, especially on those daily charts. What the MACD process looks like, and what the RSI and stochastic's may be saying. When looking at the major index charts, we see that the oscillators are healthy overall, but soon will need to digest gains and unwind back some. Stochastic's are already overbought, but the RSI's still have some room to run if they want to, thus, we're not at the levels of overbought that say, now we must sell down. The best news is that the oscillators did impulse up with the price action, which tells me real support is behind this buying. If the oscillators weren't moving with price this market would be toast and soon. It wouldn't have even made it this far up. Bottom line is things are holding well from all levels of the oscillators.

The SPX has to break through 1131, or we're still just in the middle of nowhere, although it seems like we've done pretty well. It's not as good as it looks until that number is in the rear view mirror. There is gap support at 1113 on the S&P 500, and 1101 is the 20-day exponential moving average. Any pullback should be contained within the 1113/1101 area if things are truly healthy going forward. The Nasdaq cleared 2300 and is on breakout, but we would love to see the SPX get through 1131. Then the bears would really be up against it. Until then we play slowly, but with exposure. Day to day we learn, and day to day we play appropriately as possible. If we end up losing 1090 on the SPX then things have a strong chance of heading back down to the bottom once near 1040. Things still look fine overall.

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.

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