And that's about all one can say. It is expected that this level would hold the first test as the bulls fought long and hard to take it out. Unfortunately for the bulls, it was taken out at the same moment the market got very overbought on those daily oscillators across the board. The goal now for the bulls is to try and hold this level, or close to it for a while, until those longer-term daily oscillators can unwind enough to allow for further market upside. We opened up pretty flat today, but then the move down began. We gradually moved down to 1131. Hit it a few times, but the bulls found a way to hold on and allow it to move higher. Nothing great back up. Nothing to celebrate, but you have to like it when the bulls defend their turf.

Not a great day for the bears, but at least they got some decent down side action out the small caps and the tech stocks. The DOW and S&P 500 found the action more towards their liking as the action did little to erode prices there. Bottom line is that today's action is right in line with what one may expect when you're in a more bullish mode, yet you need to unwind from overbought on the daily charts. The bulls should feel pretty good themselves as we did so a bit of unwinding, although more should be necessary down the road.

Why more? Because it's hard to blast things higher if we keep hanging around 70 RSI's and 90-plus stochastic's. In addition, on any move back up near the top, all of the major index 60-minute charts will put in a pretty powerful negative divergence. Now, it is true that the most powerful of markets can fight through those negative divergences, but you have to respect the pattern set up when it takes place. There's no question it will take place, so nothing aggressive is advised, although there are some decent set ups and a play or two can be played from time to time as this process plays out overtime.

The one thing that continues to be a constant is that whenever the market pulls back for whatever reason it does so, the leaders on the way down are the financials and the semiconductors. They are the weakest sectors, although bigger picture they are improving. We need to watch if that improvement holds, or starts to fade, as this will be key to the future progress of the stock market and whether it can race higher after these divergences, etc. play out in the very short-term. Without those two sectors the market will simply fade back down. When markets bifurcate over the longer haul it's never a positive if it's grinding higher. It'll fail over time. We need everything moving together. It doesn't mean they have to be the leaders, but it does mean they will need to participate. Two key sectors I will be watching very closely over the coming days and weeks for clues about moving much higher than 1131 S&P 500.

If we do lose 1131, and over a few pullback's time, we may very well do so, there is great support between gap and moving average at 1113/1110. Let's first see if the bears can remove 1131, and then if they do they'll run in to that powerhouse of support just 2% lower. Nothing will be very easy for the bears short-term. The market now has many bullish gaps and moving averages close together to act as support where buyers will want to come in. The onus is now more on the bears to take things down, although the bulls certainly have their work cut out for them, as well as they must start putting distance away from S&P 500 1131. Interesting times for this market, but overall, the trend remains higher.

Finally, I turn your attention to sentiment. This has been a market friend for some weeks now, but today's numbers put things back to neutral. 12.3% is now the bull-bear spread with the bears down to 29.3%, or the lowest level of bears since June 2nd. We are far from too bullish, but now the bulls can't really use sentiment as an excuse that things have to go higher, because the bearish trade is too full. This will mean the market will focus heavily on earnings that are about to come out in a few weeks and those critically important economic reports.

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 constitutinginvestment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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