By no means does that guarantee that the S&P 500 will ever break through this critical long-term down trend line that would send the bears running for the hills, if it ever did make the move. We have the GDP Report tomorrow along with jobless claims. Two huge reports that tells the market where things are on Main Street. A good report from either one can be a strong catalyst to getting closer to that holy grail of levels at 1160. But if both come in poorly, it will take the market down and test that critical 1131 all over again. That would be third time it does so over the short-term and wouldn't be the very best of behaviors for the bulls.

The market is playing off of each report and wants real evidence, it seems, that things are improving before blasting through 1160 on the S&P 500. Neither side probably feels real comfortable about things right here. Think about it. The bulls know they've had a strong run up off of the sentiment readings a few months back. That trade is over for now as things are neutral in that arena. The bulls know they need real good news for this market to make the next leg higher. Without it they won't get what they're hoping for. The bears, on the other hand, know that things are getting too close for comfort with regards to S&P 500 1160. They know a few more good economic reports can get this market over that critical level of current resistance. Both sides are nervous and waiting. We'll get the news soon enough, not to mention the big jobs report a week from this Friday.

Whenever a market is running higher you have to look for possible red flags that could put an end to that run up higher. You need to look no further than the financial's. The red flag is ten feet high and twenty feet wide there. Those stocks are in poor shape at best. The leaders, Wells Fargo & Company (WFC), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Goldman Sachs (GS) are all breaking down out of bear flags. One by one. Now, it's not too late for them as none of them have made new recent lows. But time is running out for them. They need to get their act together now.

The bulls did remove one of those red flags with the recent action in those semiconductor stocks, which are doing very well. If the financial's can start to bid then there's a reasonable chance that we'll get through 1160. It won't be easy for sure. The next few days to weeks will tell the tale about whether the financial's ever get their act together and allow the market to move appreciably higher.

The Nasdaq continues to lead, and this is a necessary component to future success for the entire stock market. If you look at the PowerShares QQQ (QQQQ), or the NDX, or even the COMP, you can see their index charts have more overbought oscillators than the other key market sectors. That's what you want to see if you're bullish. The risk trade being the way traders want to go. If they want low beta and lower risk it's not a good sign for the future, thus, the news is good from this perspective.

RSI's are near, or slightly above, 70 on the daily charts when we study the higher beta trade. They are at roughly 63 on the lower risk trade. Perfect action, really, for the bulls, but no guarantee it leads to a 1160 S&P 500 breakout, as again, the financial's must get going. 70 RSI's usually lead to pullback's on a daily chart, but because the S&P 500 and Dow are not overbought, it may allow the tech stocks to remain overbought a bit longer, thus, allowing the other sectors to get overbought first as well before a more prolonged pullback takes place.

Apple Inc. (AAPL) pulled back 17$ in roughly five minutes yesterday when the overbought nature of the stock finally kicked in. A gentle reminder of what's possible when you buy stocks on a high pole that have not properly unwound. Scary how fast euphoria can turn to fright. It recovered, but be forewarned of what's possible, and that you should never play from greed. Play appropriately.
Remember that this is the toughest game in the world. That it can eat you up in minutes if you start to do things from a greed perspective. Keep it real folks. Go for those singles, doubles, and occasionally, more when you get fortunate enough. Even though a lot of these seem to keep going, you want to be sure to understand the risk. A day at a time as we hang around just below 1160 on the S&P 500.

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 constitutinginvestment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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