Manufacturing Improving.... Jobs Doing Well.... Stock Market Holds Well

By: Jack_Steiman

The market day started with some nasty futures as the overbought, daily index charts were finally about to unwind some. That would have been great news. An hour before the market opened we got the much anticipated Jobs Report. Overall, it was in line, but it did little to nothing to help the market rally off the lows. The day started out with a gap down, and after being down as much as fifteen points on the S&P 500, we started to slowly, but surely, rally back up a bit, but remained in the red.

The market was anticipating a more important event than the jobs number, the ISM Manufacturing Report. It was more important because jobs had already recovered, but the manufacturing number had been in decline for a long time. Would we finally get a number showing expansion and improvement, is what the market wanted to know. The market is not ready to fully move lower until it had more evidence that economy was slipping further still.

The number came out, and it was exactly as the bulls had hoped it would be. A strong improvement with the reading finally above 50, which shows things are getting better. We had been below 50 for quite some time. The market liked the number, and the rally into the green was on, and was on mostly in the land of froth, or the Nasdaq, which is what you want to see in a bull market. If dividend stocks are leading up, you're in an agnostic environment. But when froth leads things are good. When risk is part of the show, you know things are good for the bulls, and today risk was clearly part of the show in a way it needed to be for the bulls to feel more confident about things. The bulls can feel good about today. Yes, we are overbought again, but overbought is not a sell signal. It warns us of a pullback, but is not a sell signal. A small, negative divergence is still on the daily index charts, but, for now, the market is fighting it off due to the happy tidings from the fed and the manufacturing report. Again, it was a solid day for the bulls.

The reason the stock market is so tough for people is because it's such an emotional game and folks get stuck in a belief system as to what's happening in the real world and how that should apply to the stock market. That's just not the way it works. Rarely, if almost ever, does the real world play into the stock market. A lot of people get stubborn and won't adapt or adjust to the game. They may recognize things aren't going their way, but they don't care. They will stick with their belief system until it's too late. I learned a long time ago that it's all about Disneyland, and not about truth.

That doesn't mean truth never comes to town to pay a visit. Every once in a while it does, and then there's a major price to pay, but it doesn't stay long. The key to this whole game is recognizing when truth is coming to town. It usually stays between six months and a year and a half. It then leaves as fast as it came, and as unexpectedly, as well. You never expect it to come, but once it's here you never expect it to leave. The market is full of hundreds of head fakes to make you feel something else is happening, but it usually is nothing from nothing. Yours truly of dumping plays too soon. Bottom line is we're in a bull market until proven otherwise.

We always have to take notice of potential problems. If we let our guard down completely that would not be a wise thing to do. We have negative divergences on the monthly charts. Slight on the daily charts. We have overbought conditions on the daily charts. It's not an open field of freedom for the market. Never look the other way when there are potential problems. Do not get complacent. If we clear trend line resistance at 2075, then we're looking at 2104. You can see that chart this evening. 2000 is strong support on any selling. It would take a forceful move below 2000 for this market to turn more bearish.

For now, the trend is up. Not every day. The trend. We still haven't broken out, and the Nasdaq is still red for the year. We take it a day at a time, and, if something sets up, you play it.

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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