What's unique about the stock market is its unpredictable nature. We're always trying to understand the message being sent through the oscillators along with price action. What is it saying! It can be very confusing and always emotional. Is it only a correction within a bigger picture bull market that's still on going? Is this a counter-trend rally that will fail on a weekly basis below the uptrend line at 1935? Will it head fake well above 1935 only to close back below on a weekly basis? It's really hard to know what's taking place when the move off then top has never shown classic bear-market distribution on any of the key daily index charts.

If it had shown distribution I would be fairly certain that this is just a counter-trend rally. Since I never did see anything off tops related to big money selling I am cautious to say we're in a definite bear market. I think the odds are strong that we are in a bear, but by no means am I 100% sure. I will need to be convinced by seeing the bears say you cannot cross above 1935 on a closing basis at the end of any given Friday. In fact, show me that you can keep things from really ever getting above that trend line. Maybe a brief intraday breach, but nothing more than that. It has been seven years so the onus remains on the bears to keep the door shut with regards to that seven year up trend line.

Looking at today's action is interesting. We saw futures ramp over night as European and Asian markets simply exploded from oversold situations. We followed along and blasted up as one would expect. The market flowed higher all day. No real selling episodes whatsoever. The bulls had their way with things from the opening bell. We see counter trend, powerful rallies all the time so this is not unusual. The question is whether this can continue on for some weeks and it seems to me it should. The daily oscillators are so deeply compressed down it would make sense for the bulls to have control for a few weeks.

Not every day, but overall. It's not impossible that the market can stay crazy oversold since we were overbought for so long, but that's just not the way markets work. They almost always trend higher so the natural thinking is that we'll rally further before trying to fall once again, and we should do that. It'll be the next selling episode over time that will be more interesting than not. My one big concern for the bulls being the action in the banks which continues to be downright awful. Even today it wasn't anything to get excited about.

After we clear 1921 there's the 1935 uptrend line, and then the 20-day exponential moving average at 1945 on the daily chart. By the time it would get there the 20's may come down near 1940 with the uptrend line also approaching 1940. The 1940 level roughly a week from now will be the key to this whole mess. If we just blow through it with force and get near the next gap at 1985 we probably only experienced a correction in an ongoing bull market as hard as that may be to believe. Never tell yourself there's only one experience to come. Never be permanent in your thinking what the outcome has to be.

While a bear market seems right based on the monthly charts, and a slowing global environment not to mention ridiculous valuations, the bull could still rage on. Doesn't seem appropriate, nor likely, but it is definitely possible. We must see the uptrend line hold and then another huge move down. That would be the confirmation. For now, it seems the market is done with heavy down side action for a while to come un less there's something unforeseen from China. It should be rest time. Watching how high we go and how the oscillators react is all that matters.

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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