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Stock Market Trending Higher Still....

Stock-Markets / Stock Markets 2011 Feb 08, 2011 - 03:17 AM GMT

By: Jack_Steiman

Stock-Markets

The questions are asked daily. How soon will the correction begin? Shouldn't I be selling my longs and going short and short aggressively? I can't blame people for wondering about those issues. It makes sense emotionally. The problem is, it hasn't made sense in the real world. Bull markets can be very stressful on bulls and bears alike. The bulls get stressed out the higher they go. The bears get stressed out wondering just how much pain they can endure and when will those losses finally end. Nothing worse than being short and watching the market blast higher.


Back to the bulls. They feel stress because they think the fun has to end somewhere. The bear markets of the past decade have taught the bulls that ultimately they will get killed if they get greedy and don't run out once you have gains. Past performance does not guarantee future results as we've heard all throughout our lives. That means there's no guarantee we'll just begin a bear market out of the blue. In fact, as long as printer Bernanke keeps those presses rolling, the odds of a bear market are extremely remote. It's all about liquidity and he's making sure those presses stay on 24/7. The bears haven't yet accepted the consequences of this reality, and thus, the bull market continues onward and upward, ignoring overbought conditions.

The old expression of never playing against the trend is a real lesson for everyone. If you can think from that perspective you can learn to keep out of harms way. It allows you to stay unemotional. That's the only way to play successfully. It still amazes me to see how many people are not playing appropriately and trying to beat the market to the correction. It's coming. I'm not talking about 2-3%. That's ordinary. I'm talking about a much more sustained pullback. It will come but timing it is totally impossible in this environment.

The market keeps sending unfortunate lessons to those who won't listen. Don't be that person. when you see a reversal that sticks and tells you it's time to move along then you do so, but until then you keep long exposure. Not so much that you can't handle the consequences of a normal pullback of a few percent. If you're not overly exposed, you can handle a few dollars being taken off stocks as things cool off. If you're fully loaded long, any normal pullback will feel overwhelming. Bottom line is if you play without greed you have a much greater chance of success long-term. Stick with the trend and don't overdo at overbought. End of story!

The market got its start today from decent news over the weekend from Egypt where things have thankfully calmed down some for the moment. Who knows how long that will last, but at least over the weekend, things definitely calmed down. Overseas markets went higher, and thus, our futures went up. We went up a drop at the open and continue higher after that.

We closed over 1311, or the old highs, which, of course, can only be looked upon as bullish. It doesn't mean the correction won't start tomorrow, but it is definitely good action to close over 1311. The bears didn't put up too much of a fight as the day wore on, although we started moving off the highs once the short-term 60-minute charts got overbought on their stochastic's and RSI's. The market worked its way lower for a while, but in the end you can't say anything negative about the overall day's action. The bulls remain in control no matter how you look at it.

The best part of this bull market, and the best part again about today's action, was the simple reality of participation all over the stock market world. Sector after sector either went up, or pulled back a bit, within overall bullish patterns that simply need handles or flags. Very little is braking down within a sector. Some stocks will always break down on bad earnings, etc., but the sectors are really holding up quite well.

This is the type of action that tells you things are still bullish because, for a market to break lower with force, you need sector charts to begin failing on big volume trends, and we just aren't seeing that take place. Sure, as I've said earlier in this report, we can pull back at any time which would bring the sector charts down a bit, but their overall bullish trend remains firmly in place. Again, don't fight those daily sector charts. They definitely tell the story bigger picture.

So we are hanging on to our plays for now. Will take half positions off from time to time when need be, but the market remains on a must own basis to some degree. If you want to go cash and wait for some deeper selling to take place, I wouldn't blame you. But I feel it's fine to hold some exposure as the bull moves along, and just deal with the pullback's as they occur. Do what feels best to you, but be careful going to short, or against the overall trend.

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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