Stock Market Big Follow Through day....

By: Jack_Steiman

The market had a big follow-through day today after yesterday's nice up-day. There are two factors that made this happen. First of all, we had great earnings after hours yesterday from Microsoft Corporation (MSFT), AT&T, Inc. (T), Amazon.com Inc. (AMZN) and Google Inc. (GOOG). The futures exploded on those reports. Then last night we had the Euro-Zone money-man, Mr. Draghi, promise more easy money or another round of QE for everyone. The party hats were taken out.

The European futures rose, allowing our already strong futures to remain powerful. We gapped up and spent the rest of the day pulling away from Nasdaq 4900 and S&P 500 2030/2050. Those levels should now be strong support on any move to possibly unwind overbought short-term conditions. We really shouldn't go back down that far from here. Those levels should be gone for good for a while, but those would be great support levels, if somehow we did go back down for a while. When you get the follow through day the breakout level should be rear view for quite some time to come.

The market simply got too overly pessimistic with two readings below zero on the bull-bear spread, and while it has gone up some, we started the week at only a positive 6% reading. We're nowhere near having worked off the pessimism. The number will likely now be over 10%. But that's fine. Short interest is still very high, so the market has more room before the party ends down the road a bit. A strong day for the bulls technically. The bears are feeling that lousy feeling all over again. All they can hold on to is the fact that we need unwinding to work off overbought, but sometimes the market can stay overbought. Beyond that, their next hope comes when we get the ISM Manufacturing Report on the first business day of November. So it's coming up fast. They're paying for a number below 50, or a number reflecting a new recession has begun. That would send a shock through the system with the market likely taking a very nasty hit. If the number is above 50, especially in the 51's, then the bears will have lost another ray of hope. It was a good day for the bulls. That's about the best way to sum things up.

It's worth spending a bit of time talking about the markets future. The monthly charts, once we clear the old highs on the S&P 500 at 2134, will flash as bad a negative divergence as you'll physically ever see. This should call an end to the bull market shortly, thereafter, although a move up to 2200 or so on the S&P 500 is quite possible. An over shoot if you will. That's normal protocol. The key to it all will be how we will pull back the first time from a new high. Will we or won't we see the first signs of distribution volume from the big money that controls the whole darn market. My guess is yes we will. Then when we go back up again, my guess is the selling will be even stronger off that top.

And so on and on, until the market gives way for good. This is a long and arduous process that isn't easy to understand all the time. Head fakes, and the like, but you need confirmation on volume of tops to give us the first understanding of what the future holds. I believe we're in the last leg of this six-year plus, bull market, but who knows, we'll see as we go. I think the bear market will kick sometime early in 2016, and I think the bear will be very nasty. Again, only time will tell, if I'm right or not. For now, however, the bulls are in full control of things. It's my belief we'll eventually clear 2134, and move higher before the bull market says goodbye for a long time, meaning one year or a bit longer.

Once we clear S&P 500 2079 or gap resistance with some force we should be on our way up to 2134 over time. We are somewhat overbought thus at any time we can see a pullback but they should be bought up pretty quickly. The bulls are ravenous again so selling will be bought up. We take this market a day at a time with weakness always best in terms of new buying. Keeping a bullish bias for a while longer folks.

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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