We were gapping down once again this Friday morning. It wasn't a massive gap down, but it had potential. A five handle on the S&P 500 isn't major, but it is something the bears can work with. Within minutes their dream was gone. Once again the bears refused to get in front of the selling out of the gate, thus, the bulls were able to keep things going albeit slowly as the day moved along. A nice rush very late in the day gave the market a push to the green. Once again, the bears have to be shaking their heads wondering what it'll take to sell a market that has everything going against it.

If I were a bear I'd be wondering too. It seems the bears have been hit too many times across the head whenever they've tried to pile on. Front running has really hurt them, thus, they are a bit shy in terms of getting aggressively short. It's as if they're all looking at each other saying hey, you be the first to pile in and if you're successful then I'll join in as well. They can't seem to get a crowd of folks in on their side, therefore, the volume it would take to reverse matters isn't there. You see that after the first half hour stick on the gap downs. The volume disappears with the second candle usually a green one. The volume can't be sustained for whatever reason. We don't have to understand it but that's what's been taking place. Until the trend changes the bulls remain in control.

You have to keep in mind that even when there's a sell signal of some type in the market, here a froth signal, you need time, often lots of time, to turn the ship around. Bull trends, and for that matter, bear trends, take time to lose their full momentum. When folks are in on the trade whether bull or bear, it really takes a long time to switch the trend, because folks are trained to chase when things go the other way. You can multiple tops after it sells some in a bullish trend. We are getting that now, but we're also close to a major breakout in price, and that's what the bears really don't want to see take place.

With the sell signal in place based on sentiment the bears need to act now or they'll allow the process to continue on, and then it'll take that much longer for the trend to truly reverse. So yes, we have froth and unprecedented levels, but price and oscillators in the end rule the market. Until they show what it takes to change the trend you stick with the trend in place. Never front run. I tell you this over and over so you don't hurt yourself for no reason. Markets can behave inappropriately a lot longer than you think possible. So we're at that moment in time. Lots of pushes lower with tests back up. The bears really need to act now, or they'll total control of the uptrend. They'll get blasted even harder. Do or die time.

There can always be a time when the market does something differently that it has done time after time before in the past. We're seeing the bull-bear spread stay over 40% for a month now. That has basically never happened before. If it has, I haven't seen it, nor do I remember it. It's extremely rare to ever even print 40%, let alone stay there for a month or more. What I'm trying to get at, though, is that there is still EXTREME RISK in this market. It can fall hard at any time without provocation. Do not forget that. It may not occur for weeks or months, or it could happen Monday. Just make sure you recognize what's at play here. Keep some scratch in the game, but be sure to remember that the market is not your friend, and it would put you out of business in a moment if you let it.

Have a Great Weekend!

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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