There is a large belief that the market has no chance for a break up and out from here. That the top has been put in when it failed above 1150 a day back. That may very well be true, but I don't think that's the case at all. When the market got to the 1150 area on its way to the big one at 1160, it did so at overbought. Not the best way to get there. It was natural for it to fail there after a big run up. First tests after a big run usually do fail. It usually takes multiple moves back up to take it out.

What you want to see is how the market behaves once it does fail. Will it just fall apart, or will it create a handle, or consolidation, that it can use to work off overbought? This is what is so critical to understanding the future movement of this market. It is my belief that it is handle or consolidation time, and not breakdown time. I will get into the reasons as this letter moves along. Today was a consolidation day and that's the bottom line. Strong buying on all dips after another gap up failed, and that's what you want to see -- thus, today was a decent day for the bulls overall.

Let's go look at those financials. One of the key ones in the group is, of course, Goldman Sachs (GS), which made a very nice move today back over, although only slightly, its 20- and 50-day exponential moving averages. Good action. It's critical for this leader to get off the mat and stop underperforming if this sector has much of a chance to get rolling along and lead this market higher.

In addition, another stock in the dog house and an old leader, Research In Motion Ltd. (RIMM), broke out through its 50-day exponential moving average. Again, not by much, but it broke through nonetheless, and that's important. Underneath the surface some old dogs made some important moves higher while everyone's focus was elsewhere. Good to see this type of action in these two old leaders which need to lead again. We'll see if they can hold their positive action from today early next week. So far so good.

When I watch the business news channels, and I don't do it much, I still hear a lot of disbelievers in this rally. Many have been shorting and getting smoked for quite some time now. They will try to convince themselves, and thus, you, that this just can't continue much longer if at all. They are baffled by how well the market has held up. I can't say that I blame them, but it is what it is and they have been, and still are, fighting what's taking place. The market needs these consistent doubters in order to continue to run higher. Once everyone likes the market, the market won't like anyone. The bears are still rocking enough to keep this market inching its way upward.

S&P 500 1150 remains the first important level of resistance, while 1160 is the breakout the bears don't want to even talk about and for good reason. 1131, 1125, 1113 and 1110 are support areas -- moving averages and gaps, etc. The internals on this rally have remained very favorable, and thus, it's hard to imagine this market taking out all of these levels in the near-term. Some selling, of course, but blowing through these levels is unlikely.

The economic reports over the past week have been mostly favorable, and this adds to the unlikelihood that this market will just suddenly give it up. It always can, and I never let my guard down, nor will I be in denial if things turn south in a hurry. I won't question it. I will adapt to it and move along. However, I do think the odds favor a market that will continue to grind higher overall and ultimately have a very good chance of moving through S&P 500 1160, or the two and a half year down trend line on the weekly chart. One day at a time for now as we learn what this market wants to do with this consolidation. So far so good, but I'm always on guard.

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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