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Stock Market Pushing Higher From 20/50 EMA Support.....

Stock-Markets / Stock Index Trading Mar 02, 2010 - 01:07 AM GMT

By: Jack_Steiman

Stock-Markets

No, we still haven't made it cleanly through S&P 500 1115 or the next area of strong resistance but at least we moved higher once the S&P 500 and the rest of the critical index charts tested their 50- and 20-day exponential moving averages from above. You don't want to see those captured levels get taken back by the bears thus it was put up or shut up time for the bulls and today they surely put up. A nice strong bounce off those 20's and 50's. Just what the doctor ordered.


Volume was solid and here's the best part. The bulls used the move off those 20's and 50's with a gap up. That's critical in the evolution of the market as it tells the bears that there's now another level of solid support for the bulls to buy off of an any pullback. The gap up was also over 1107, the most recent level of nasty resistance that this market struggled with for many weeks. Good solid action once we gapped up. The bulls refused to give back any of the early move up thus no gap and crater which would have been more bearish.

Now I am not going to say that this market exploded and it's all clear now for the bulls. Not the case. I won't play the game of spin doctor to make things seem better than they are. After the gap up ran up to 1115 it stalled and sat in basically a three point range for four plus hours. Unusual and it shows just how tough S&P 500 1115 is but at least the market held the gap up and actually ran higher slowly as the day went on. Still work to do for the bulls but a good solid start for sure. We closed right at 1115 although a bit overbought on the short-term sixty minute charts thus a small pullback could take place but it shouldn't be much.

Let's get a little in to psychology and what many are expressing to me in terms of this rally and the market overall. I'm getting calls and notes about the news that's out there. It seems bad doesn't it they say! How can this market move up in to this economic environment both from a national perspective as well as a global one? I can not argue from a fundamental perspective that things aren't very good for this market. I'd have a hard time making up something that seems bullish from that angle. I know there isn't much good out there. Country after country seems to be on the precipice of something bad. Bail city. bail or bust is the way things are unfolding. In this country we hear over and over about the increase in foreclosures along with new job cuts not to mention a lack of job creation. Housing valuations aren't anywhere near what most have bought their homes for over the past five years or so. The list is endless really. So why are we climbing higher Jack?

First of all, we're not exactly exploding higher. It's grinding. There has been no thrust upward. We're able to grind higher because of something I speak about all the time. Sentiment! The market is loaded with shorts. Folks are scared. Not many like this market and from what I just wrote about, you can't really blame them. However, when sentiment is negative, markets tend to go higher. Add in that earnings, from stimulus or not, is getting a bit better. Yes, it's from cost cutting, etc., but it's better and the market likes the way these corporations are doing whatever it takes to provide better earnings. It's not the best of situations but with decent earnings and with negative sentiment, it's hard for the market to fall apart. Thus you see what you see day to day. I read and research and the majority of folks are bearish. That's good for equities.

I am not so confident in this market that I would leave plays on too long. This is still a hit and run market. Not my favorite market by any means. Some plays come off too soon. Take some gains and then they go higher. I don't care. if you make money I'm happy enough. Some we let run longer. Some we don't. No apologies. We are not in a rip roaring market. We are not in a throw a dart market. This market is very tough for sure and there are plenty of implosions out there on a daily basis. You have to be more than careful. Even if you are some plays can blow up in your face.

This market is still teaching some very difficult lessons to a whole lot of people. I think this market is going to hold up for a while longer but by no means do I think this is a SAFE market. The longer we hang in there the more bullish things will get. Wash, rinse and repeat. Right now I believe things go higher overall but there won't be any runaway bull here. Let's just take advantage of what the markets giving. Long is the way for now.

If we can clear this 1115 S&P 500 level then we can run to 1130/1135. As we get closer to 1151 it will become more and more difficult to find sustainable upside. Just the way it is. At least on the first try there will be intense resistance. The 1130 to 1151 area will get tougher and tougher with every point higher. I'd suggest you keep your enthusiasm at a low level. If we can ultimately take out 1151 with force then the bears are completely toast. For now, let's just deal with getting through S&P 500 1115 so we can try 1130/1135. One slow step at a time.

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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