So now that the bears finally have froth below the key 50-day exponential moving average on the daily, there is just one ingredient missing from taking over this market for the short-term. You all know what it is by now, but here's the refresher. A large gap down that runs lower for the entire day, with a close at, or on, the lows for the day. If they can accomplish this then they will have put technical damage in to this market, and they will have also put the 50-day exponential moving average on the Nasdaq in the rear view mirror.

Just because they closed the Nasdaq below those 50's today doesn't mean all that much, because we all know how fast the bulls can take it back. The bears are desperate for that gap down that sticks. They don't need a gap down that hollows out. One that sticks. Step on it. Crush it. Keep it down all day, and don't allow the bulls to breathe. If, and what an "if" that is, they can do it. They are in business and will be in control. They haven't been able to for what seems like forever, although trusting them isn't easy to do. I wouldn't, because the onus is on them to do something that has been out of their reach for a very long time. Show me time is upon them. They have their chance. It's time for them to seize on it. We shall see what tomorrow brings.

The day began much as every day begins for this market. A gap up across the board. But as of late the trend has been to sell the gap ups, even if we close green for the day. It has been much tougher to sustain upside. The Nasdaq led down as usual with those oversold froth stocks getting a nice bounce early only to see those bounces turn in to some very ugly losses and nasty candlesticks. The Dow and S&P 500 soon gave up large gains and began to follow lower. This was the type of day that could mark a major top for a while as key levels were lost.

After so much gap up attempts it seems it's time for the bears to try their luck. Today's action printed some nasty daily index candlesticks. That shouldn't be ignored. Yes, some individual stocks had bad ones as well, but when the index charts flash these types of sticks it's something to respect. Today was an overall bearish day off the morning gap up, thus it's time to be in protect mode. Avoiding froth at all costs. They will have strong bounces, and it's hard to argue that they are more than due for one, but their trends are lower overall.

With weekly charts flashing nasty negative divergences, and with monthly charts being very overbought, along with sentiment showing far too many bulls over bears with a 37.2% reading, it would be great if the market actually did continue to fall for a while. It would unwind the oscillators nicely. But more importantly, it would unwind sentiment. Get those bulls to hate life in the market and swing to bearish. If we keep going higher it's really unhealthy. It would be best if we sold for a while. It doesn't have be a slaughter.

It can be a gradual, grinding unwinding of price and oscillators. That would be more than enough to get the job done. Whatever it is, it would be best to at least stop grinding higher for a while. If the bears can now get the S&P 500 below its 50's at 1840, it would be great for the unwinding as well. This won't be easy, but at least we have taken the 50's away on the leading froth area of the market. Lots of cash is a good thing here.

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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