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Stock Market No One Has Control....Strong Finish For The Bulls...

Stock-Markets / Stock Markets 2010 Aug 07, 2010 - 02:25 AM GMT

By: Jack_Steiman

Stock-Markets

No one has control but you have to give a little nod to the bulls today for hanging in where they had to at the down trend line at S&P 500 1110. A small breach below and then a nice rocket ride back up. You're always looking for something that tells you someone is taking control. With the market at that down trend line, it was step up time for one side to take command, and for the day, the bulls did. However, no one is in control since all we're really doing is continuing to trade in a range between 1080 and 1131. Until this range is taken out with force one way or the other, there really isn't all that much to do except try to find the best set-ups and play them.


Whichever breaks first should cause a directional move for a while that should make trading a bit easier, but until we lose 1080, or blow through 1131, trading remains more difficult. Pick your spots and take things off fairly quickly, or you'll be wishing you had. The range is nearly 5% wide, thus, there's no telling how long we'll stay in it. But for now, it's a play the range strategy that needs to be respected. Don't look past it. When the break occurs, whichever way it is, then the strategy changes to a more aggressive directional approach.

This was a very interesting day. The big jobs report was on deck this morning one hour before the open of trading. The numbers came in somewhat disappointing. Not terrible, but let's call it poor. Nothing that said gloom and doom, but nothing that gave much hope for the future of employment growth. The futures weren't thrilled, and slowly but gradually, eroded until the market opened with a hefty gap down. The selling began to accelerate after the usual move back up.

The Dow was down 160 points, and the S&P 500 was breaching the down trend line at 1110. The bulls were hanging on by a thread. And then it happened. Blast off back up. No rhyme or reason. Just the typical bears choking on it these days whenever they have the bulls on their knees. The market shot up off the lows, and although the market was red across the board, huge hollow candles were the norm. Those types of hollow candles usually bring about higher prices in the short-term. Never a guarantee, but that's the norm. It was a come back day for the bulls, although they still have a lot of work ahead of them to get this S&P 500 through 1131 cleanly.

Now for the bad news. The 10-year bond continues to erode at an amazing pace, offering up under 2.9% for a 10-year stay. Folks are running to this for safety, thus leaving their cash out of the market, and cash is ultimately what the market needs to move appreciably higher. This is missing, and makes me wonder just how long this market can maintain any real upside action. We'll need to see money pour out of bonds at some point and in to equities in order to realize higher sustainable prices in the future. The public simply has no trust in the market. With the economic news such as it is, it's hard to blame them. We need to see the 10- year bond blast back up over 3% for this market to have a chance down the road.

The S&P 500 has a lot of constructive support sitting not too far below current price, which will make the job of the bears all the more difficult. First, there's the trend line at 1110, which held very well today. Just below 1110 we have the 20-, 50- and 200-day exponential moving averages at 1101, 1098 and 1095, respectively. 15 points has four major support zones. A huge confluence of support that will make the bears sweat. Hard for them to take out so much all bunched up together. It can be done, but the job won't be easy. 1131 is the new wall of China the bulls must power through to get it up to 1150, and then 1173. Lots of failures thus far, but at least the market held well today considering the news. It gives the bulls a fighting chance again in the short-term. In the end, it's all about 1080 and 1131.

Finally, once again I must talk about the financials. They stink. That's reality. They are set up well, however, and thus, there's a chance they'll finally get rocking soon. I think that this is the real missing piece for the bulls short-term. If the Financial Select Sector SPDR (XLF) can hurdle over 15 flat with force on a closing basis, it sets up a strong run higher. This would set up the S&P 500 to burst through 1131, and rock higher. Again, the pattern is favorable. Now the bulls have the onus upon them to blast it through. No excuses.

The time has arrived. Get it done, or lose the pattern and the possibilities that are presently there.

With today's recovery off the lows, I hold a more bullish bias that we'll take out 1131 before we lose 1080. But nothing is etched in stone. See the move and get aggressive. Until then it's step by step.

Hang in there and have a fun weekend.

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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