The fed market is on a mission. It wants to change the way we look at technical analysis for good. Or at least for a long time to come when the next bear market kicks in. That's likely a long way off since the fed will serve and protect for a long time to come as she is basically promising low rates for years to come as mentioned in her speech yesterday. She wants to create inflation. She doesn't want to do it through the market, but since the global economy stinks there basically is no other way to do it. She uses words that she knows will excite the market masses. Every word carefully planned. Every word with a meaning behind it. While she's not a very good talker, she is a very convincing. It doesn't matter how she says it that matters. It's what she says. So with the promise of low rates and more stimulus if need be, we can't seem to find a top in the market, even though it's grossly overbought and flashing some negative divergences now on the daily chart.

You can spot one on the S&P 500 daily chart MACD. But who cares about negative divergences and overbought conditions. Technical analysis is almost a complete waste of time now. Ask those raging bears who claimed on the business news channels that the charts showed 1400 S&P 500 was coning this year. Highly respected technicians at that. Their charts were convincing, but the fed had other ideas. So today we saw a market with a potential topping stick, but maybe we sell half a percent or so and then just try higher again on Friday. Or maybe tomorrow. The market, it seems, almost can't sell. Even if it wants to it basically can't. Just too much money looking for a home in equities, because the fed market is such that there are few other places to put your cash. Maybe no other place to put your money where you can get strong returns. The bull market to nowhere continues but gaining momentum.

So what could derail this market short-term, you ask. That's a good question as we always have to take note of what can derail the fed market we're in. To start off we are getting very overbought on the daily charts, not to mention repeatedly so on the short-term, sixty-minute charts. Repeated overbought on any time frame isn't healthy. It shows the formation of what could be a blow off top. It would be best if we could get some real selling to properly unwind things so as to create a safer buying environment. The index daily charts are getting up there where you normally see some real selling. Not just a pullback, but some very intense selling.

Add in that we're seeing some MACD negative divergences on those index daily charts and the risk is higher still. In addition, and you'll see those charts this evening, we are at major trend line resistance. One would think that any fed market would stop at these trend lines for at least a pause and especially since we're also overbought. We should pause here, but we'll see. Trend line, overbought, and negative divergence, oh my. Probably won't mean a thing, but we have to note that things do exist, and so we need to respect them no matter how much the fed is controlling the fed market. There's a lot of not so great technical's out there that say we should be falling, and falling hard, and even though we likely won't, it's best to be safe and respect them all. Be aware and don't get too complacent.

Sometimes in this crazy game it's a sell the news event. The market has the daily-double this coming Friday. We have the always important Jobs Report one hour before trading begins, and then thirty minutes in to the trading day we have the more important ISM Manufacturing Report. The market seems to be anticipating that both reports will be better than expected. If both are good do what the classic gap up and reversal day? That's what I'd be looking for especially since the market will be very overbought on yet another gap up situation. With the fed market such as it is maybe it'll be different this time, and the market won't sell the news but historically that has often been the case so we'll have to be on watch for that. For now, the market remains bullish with 2075/2080 trend line the key-resistance level we're focused on short-term.

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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