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Stock Market Hanging Tough.....

Stock-Markets / Stock Markets 2010 Mar 04, 2010 - 01:26 AM GMT

By: Jack_Steiman

Stock-Markets

This market is really trying to hang tough and hold S&P 500 1115. It's not bad if it falls below by a few points as the oscillators unwind from overbought, but that level held on today's lows as things finally started to pull back off their highs. As soon as it hit at 1115 buyers came in showing you what the bulls think of staying above this level just captured yesterday for the first time off the recent lows.


Good solid action for sure by the bulls, but if you study the 60-minute charts you will see that they could still use some work to get things set up perfectly for another run higher towards the S&P 500 1130's to 1150 area. If you're bullish on this market you have to be excited about the prospects of higher prices to come based on today's performance when the market had every right to sell harder from overbought.

Strong up trending markets don't give up their gains easily and they especially don't give up resistance levels just taken (1115). Weaker market tends to sell very easily once you get anywhere near overbought on any time frame chart. This market is not at all showing this type of behavior. This tells you things are definitely on the positive side of the coin and that the bears will have trouble sustaining any type of continuous downside action. The markets finished basically flat for the day which isn't bad when you look at those 60-minute charts and see how mush unwinding took place. Not near complete but a definite nice start without any price erosion.

When markets are trying to trend higher I always want to make sure that sentiment isn't getting too bullish. When the numbers came out today I saw something I liked due to the fact that I have a bullish bias in the market here. The bull bear spread is only at +19.4% more bulls. You need levels over 30% and usually over 35% to get the market to switch gears and head south. Last time it took 37.5% if you remember. This caused the top and gave us our 8% market pullback across the board. 19.4% is neutral and thus remains favorable for the bullish case.

The PowerShares DB US Dollar Index Bullish (UUP) or the ETF for the dollar has finally started to fall after trying the top four different times. Each equal or slightly higher high was greeted with negative divergences on all the oscillators on the daily chart. Add in a negative divergence on the 60-minute chart a few days back and it finally started to fall. It lost the 20-day exponential moving average today but has the critical level of support that must hold at 23.30. It's now trading between the 20's and 50's and it'll be interesting to see which way it breaks, but for now the chart isn't very favorable looking. As long as the UUP struggles it's likely to be decent news for the bulls in equities although equities have been holding up well lately even as the UUP rallied.

Many stocks are simply hitting the top of their wedges as are many index charts. It's now time for some type of handle. that would be best. If the handle gets put in with little price erosion, you will want to get your buy list handy as the market should make another leg higher. We need to watch and make sure this is what takes place. I think it will and I see many stocks starting to set up already. A little patience here is warranted. Things still look very good for higher prices fairly soon.

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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