Stock Market Running Higher.....

Stock-Markets / Stock Markets 2010 Mar 06, 2010 - 01:58 PM GMT

What other expression fits this market but that. We gapped up this morning on a much better than expected employment report. Far less jobs lost than expected, even with the bad weather. This gave some decent futures a bigger bump up and off we ran. First we saw the bears fight some giving the indexes an early black candles but it didn't last long as the bulls took over. The Nasdaq out performed all day but the other major indexes did quite well on their own. When beta leads it's good news for the market and higher beta definitely led for this day. In fact, the Nasdaq made a new intraday high over the last high by a point, 2327 versus 2326.

The S&P 500 has yet to get there at 1151, but the mid caps and the small caps joined the parade with the Nasdaq, easily setting new highs. It felt as if the market was going to go higher, regardless of what came out on the job report this morning but the solid report gave this market the impetus to get going some with force rather than the grinding sticks we've been putting in lately. Great to see a clear body candle across the board, leaving no doubt as to the market’s intentions. A victorious day for the bulls with the bears hanging their heads low in despair as things are looking better and better technically.

The financials broke out today, Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), JP Morgan Chase (JPM), and leading the group was Goldman Sachs Group (GS) just to mention a few. I have spoken frequently about the importance of the financial/bank stocks finally breaking out of their wedges. They lagged but not today. To see many sectors set new highs on this run and on the day the financials broke out is no coincidence. When the financial and bank stocks are rocking higher, the job gets that much tougher for the bears because this is the one area that has lagged the most and where the bears have made the most attempts to keep the market at bay. Not many places for the bears to run now that this area of the market is joining in on the fun. Keep on eye on this sector for if it holds this wedge breakout on the next bout of overbought selling to come, that sector is likely to lead things much higher in the future.

Sentiment will start to move higher now. How far and how fast is totally impossible to tell. Going in to this week, the spread was at a more neutral 19.4%, more bulls. Once it starts to get near 30% it'll be putting out a red flag. Once it gets over 35% you can no longer go long stocks with any sense of safety. There is still time for that kind of sentiment to happen as things move more slowly when markets have had large pullbacks in the recent past such as we just had. Fewer and fewer trust after getting burned a few times as many if not most have. I will keep an eye on things as we move higher in this market but for now sentiment is still fine for the bulls.

We closed the day with RSI's on the daily charts getting in to dangerous territory. It's not bad for anything more than a small pullback but you have to be prepared for that to take place as you can't stay above 70 RSI for very long. On the 60-minute charts it comes and goes quickly, but on the daily charts, unwinding takes a bit longer. I don't expect too much unwinding as we are now watching the bulls take over full control of the market. You won't see RSI's get anywhere near oversold but some unwinding will be necessary shortly.

The Nasdaq closed at RSI 70 but the small caps are at 73 and the mid caps at 72. The Dow and S&P 500 can still go a bit higher but it's getting top heavy here. Now, it is possible this market will just keep running and ignore things until RSI's get totally ridiculous. This is why you keep some plays going but it's best to not be heavily involved when you get this overbought. Stochastics on the Nasdaq are approaching 98, so you get the point. A day or so of selling will need to ensue fairly soon if not almost immediately. Maybe we can squeeze another up-day or so out of this market because of the great close today and full clear candle stick that was printed off the gap up.

If and when we do get some selling to unwind things, let's see where the leader, the Nasdaq, is suggesting we can find great support. There is today's full gap to look at first. The top of the gap is at 2301 with the bottom of the gap at 2292. If that whole gap was to be taken out, we have another gap top at 2275. Strong, powerful support on this index that tells me any selling to come will not be bad at all.

Have a great weekend!! Peace,

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.

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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