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Stock Market Trends Higher Still.....

Stock-Markets / Stock Markets 2010 Mar 19, 2010 - 03:13 AM GMT

By: Jack_Steiman


An old story for sure. The market that just doesn't want to fall very much or even think about surrendering S&P 500 1151, the level just captured by the bulls that officially told us we were on breakout. When we were trading below the bears had some hope. The bulls fought time and time again, finally claiming victory a few days back and now they’re throwing everything they can at the bears to keep it over this key number. So far so good, no matter how overbought those daily charts may be. It's forcing everyone to keep some scratch in the game, even though it makes us all feel uneasy due to those levels of overbought. I look around the world of stocks and see so many stocks in great handles, you simply have to keep giving the nod to the bulls in their ability to keep this market moving higher.

Let's go back to those handles that are set up everywhere. One thing all of you have to recognize is that these handles in many cases are quite a few dollars from top to bottom. As these handles fiddle about they can make us all feel a bit uneasy because the plays can move south for a spell. You have to be sure not to get shaken out. IntercontinentalExchange, Inc. (ICE) for instance, a new long play, has the handles from 106/107 up to 112.

All noise in between these two levels but you have to stick with it until you get the move up and out. These plays move up two, then down two, and play with your head, but try to keep the bigger picture in mind when dealing with these set ups as the market tries higher over time. The reason we're in some of these handles is because the bases are large and when the breakout comes, the measurements are quite high. You want to position in them ahead of the move, but again, be prepared for swings and try not to get emotional with them.

The beautiful thing about this market has been the rotation that has existed since this bull move began off S&P 500 1045, the recent lows. Not once since this market began to rally has money actually left the market. It has rotated. When a particular sector gets overbought, new money comes in to sectors that were oversold at the time. As long as the money within the market place is rotating from sector to sector, sustainable selling is not possible, thus frustrating the bears. Wherever they run they get burned. This is another reason why I don't like to short a bull market. Just when you think you have an area to short figured out, it starts to get money flow. Bottom line is as long as we have rotation within the market, the bulls will remain in control.

Yesterday was interesting in that the put call ratio sky rocketed early on in the day as the market was so overbought the bears rushed in to take positions of what seemed like a certain pullback to come. I was in that camp thinking that we'd get a pullback but never would I short. Put call reading, the first three of the day, were well over 1.0 showing massive pessimism. The market refused to fall, of course, frustrating the masses as usual. There is definitely enough disbelievers around to keep sentiment from getting out of hand.

We could still use a pullback and thus you can't be shocked if one comes along here. No guarantee we'll get much of one as the bulls want to defend and pull away from S&P 500 1151, but you know it's realistic to expect one when the market is this overbought. We’ll deal with them as they come and use weakness in the right areas to accumulate positions. That's the best and really only safe way to play for now.



Jack Steiman is author of ( ). Former columnist for, 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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© 2010

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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