I have spoken often about looking for signs about what type of market we're in. One clue is to watch how the market handles bad news that comes from just about anywhere, especially earnings. We had a disaster last night in two key places from the world of technology. International Business Machines Corp. (IBM) and Intel Corporation (INTC), two major market leaders and economic indicators, both said things were eroding. Not good news to be sure.

The market fell initially on the news, which made sense from a short-term, overbought posture anyway. However, once the market was no longer overbought on those short-term 60-minute charts, it rebounded strongly allowing all the indexes to finish near the flat line. Slight gains to be exact. Who can complain about that if you're bullish in nature here. If the market was in a bad place overall this type of news from two key stocks would have killed the market. It didn't, and this, again, is the proof that the market has been, and still is, in a bull market, like it or not.

Think it shouldn't be? Who can argue with that logic. However, it doesn't matter what we think it should be. All that matters is that it is what it is and what it is, is bullish. Argue all you want. Can we pull back? Of course. Lots of them around the corner. It can occur at any time. Bottom line is things are more bullish in nature without question.

Leaders. The market is always looking for leaders. These days we're seeing leadership in transports, housing and real estate, biotech's, materials and more. Some looked terrible lately, but have turned the corner and are turning up. This all in conjunction with the biggest leader of them all these days, the financial stocks. Hard to believe it, since they were the worst performing sector for years. Forget months. Years! They are now leading thanks to the world bank's efforts along with Mr. Bernanke. There's just too much protection for the time being. It's still about rotation. And there are leaders everywhere still hanging very tough. Technology is struggling the most simply because those stocks are reporting the worst earnings thus far. I wouldn't be very aggressive in that area until things turn for those stocks.

No indication that's happening yet as eBay Inc. (EBAY) is poor after hours. It was poor, but now I see it has recovered some. We'll see where it is in the morning. That said, it's best to look at the areas of strength I just mentioned above. All in all the leaders in the strongest areas are doing very well and allowing the market to hold up when we're seeing weakness in technology.

One major leader to watch that has been weak, but is trying to strengthen up the past few days even though it was lower today, is Apple Inc. (AAPL). It has all kinds of resistance just above between 650 and 654. 20- and 50-day exponential moving averages to deal with along with gap resistance. Add in a strong trend line and you have massive resistance and a real headache in terms of breaking out. However, if it were to be able to break out above 654 it would be extremely bullish for the stock, and thus, extremely bullish for the biggest laggards around, the technology stocks.

Apple has major weighting and if it can break out the bears will surrender in their efforts to bring the technology stocks down further. Other stocks in that area of the market that are trying to firm up are Priceline.com Inc. (PCLN) and Google Inc. (GOOG). We shall see but, while that sector is lagging, there are some hopes if these stocks can start to firm from here. There are signs that it's beginning to take place but it's far too early to say they will start to move higher with force.

So here we are with fundamentals going against market action and the technicals. So what's a player to do? You play the trend with a cautious tone. You don't have to be overly aggressive, but you also shouldn't be all cash. Play what sets up. Be diversified to some degree, but also stay away from the weakest sectors, and spend more time involved in that which is leading with strong price action. Be patient as the market is still whipsawing around, and thus, anything you own will have swings, and thus, some days won't be all that good.

If you own too much it'll be tough to hold on the down days. Be appropriate. Be involved. Don't over do it.

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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