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Stock Market At trend Line On S&P 500.. Dow Above....

Stock-Markets / Stock Markets 2010 Jul 14, 2010 - 01:30 AM GMT

By: Jack_Steiman

Stock-Markets

And yes, it is overbought on the short-term charts. A pullback of 15 or so S&P 500 points can occur at any moment in time, or possibly even a bit more. It seems that the positive divergence on the MACD at the lows, along with the 30-RSI readings and 2% bull bear spread, has put the bottom in for this market for the short-term. It doesn't mean we don't get decent pullbacks. We will. However, it does also appear that the market can now chop its way higher back to the 1131 area over time, which will allow for decent gains on long plays.


Don't expect straight up. Nothing is straight up. It will take some special reports on earnings to get this market over the recent highs at 1131, but that's always possible, especially if we get more reports like we did tonight from Intel Corporation (INTC), which blew away their numbers. The market has continued to climb over important resistance levels over the past many days with many indexes clearing trend line resistance, but some still a drop below. Positive action for the bulls here, thus we should continue to climb higher with 1-2% pullbacks along the way.

The market gapped up, yet again today, when good news came in from Greece on a bond auction that really went much better than had been expected. This gave the overseas markets a boost, which was reflected in our futures, and thus, the gap up opening. The key was whether we'd run after the gap up, or print a black candle, which would have meant we'd probably seen a short-term top. It ran all day. No strong pullbacks whatsoever.

The volume was solid, though unspectacular. Not bad, but heavier at the trend lines would have been nicer. Not bad for a mid-July Tuesday, though. The better part of the internals was the action on the advance-decline line which averages better than 5 to 1 positive, which is essential to see when climbing over strong resistance. We closed near the highs and right above the trend line on the S&P 500, but well above the trend lines on the Dow, NYA, and other index charts. Solid overall bullish action.

INTC absolutely blew away the earnings estimates set up for them by analysts. They beat by eight cents, and beat the revenue expectations by roughly 7%. In addition, they raised previous guidance on margin growth from 64% to 67%. Really solid numbers that can't be denied as surprising. No one expected this. Took me by surprise for sure. It is what it is.

Can't imagine they would not be telling the truth with how each company is being watched these days. They're also known for their blunt honesty, as many times they have disappointed the street. They don't play spin doctor, and I have always respected them for that. Like I said, they usually disappoint, so today's report bodes well for them and many others in the semi-conductor space. There are many other earnings reports that will disappoint and cause bad nights for the futures, but this report is a good sign for the bulls for the big picture.

The previous reports on earnings had been bad from a few weeks back. FedEx Corporation (FDX), Nike Inc. (NKE), Best Buy Co. Inc. (BBY), Bed Bath & Beyond, Inc. (BBBY), and others had reported poorly, and had taken the pain for doing so. This tells me that we will have to deal with some losing reports that will hold the market back. So, please don't get overly bullish for no good reason. Things are looking up for sure, but you don't want to get overly involved until the crux of the earnings season is over, and we get the total picture about how the economy is or is not humming along.

We will be able to see where the economy is shining and where it's dull, thus different sectors will do different things in terms of performance. That's key in learning where to put our money. It's not a throw a dart market. You will have to be very careful about where you put your hard earned dollars. I keep score of all the earnings reports to try and get a feel about what's working in this economy and what isn't. You should try to do the same for your own trading ideas.

S&P 500 1093 is key resistance, and we are above by two points, however, that's not enough for me to consider that taken out. We will likely gap up tomorrow, so it'll be interesting to see just how far away from this number we can get. We are also overbought on the short-term 60-minute charts, but not at all on the daily charts. We will need to pull back soon. Just the way it is, although some black candles may be flying tomorrow. At least things are improving technically. Now we get to see how the market handles overbought once again tomorrow on those short-term charts.

Interesting times for sure.

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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