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Stock Market Daily Charts Remain In Control For Now....

Stock-Markets / Stock Markets 2011 May 10, 2011 - 02:01 AM GMT

By: Jack_Steiman

Stock-Markets

bottom line for the action we're seeing. The weekly charts we know are bearish, but we also know the primary chart to follow is the daily chart. Only when the daily chart confirms the weekly chart can we say with more assuredness that we're about to correct with some force rather than the tiny little selling days we get from time to time. The daily charts for the major indexes are all in bullish inverse patterns and that has to be the focus until broken. The bears can't even remove the 20-day exponential moving averages, let alone the key 50-day exponential moving averages further below.


The bears are showing no guts here, and until they do, the benefit of the doubt remains with the primary trend in place and that means higher, even if it's a grind. It doesn't mean a blast higher as those head winds are real here, but it can mean we find a way to grind back up for a while. Bottom line is there are red flags all over the place, but the primary trend is still with us and playing out, and thus, you'd be wise to go with that until it tells us not to with the right reversal lower through key support moving averages. For the moment, that is just a fantasy for the bears, who have shown us nothing at all.

We started out flat today. Just a small move up, but basically, flat out of the gates. After pushing up a bit, the bears tried to take things down, and did so for a brief moment or two. It didn't last long as the bulls gradually took control, something they do on a regular basis. The Dow went up 80 points when it hit its intraday high. It fell back as the day closed out. It was still a positive day for the bulls.

Good solid action one sees in a strong up trending market. Hit the 20-day exponential moving average and is now rallying. The 60-minute charts weren't great on the move up, but they were far from bad. The Dow finished up 46 points while the Nasdaq closed up nearly sixteen points, thus, showing leadership, which is key. Froth led, which is what you always look for in a bull market.

Be clear that I'm not saying all is well here, because it's not. The banks can NOT get out of their way. They absolutely stink to be blunt. They can't get any form of a consistent bid. They have been under performing for years, and have shown no life whatsoever in this bull market other than to get dragged up from time to time. The charts of Citigroup, Inc. (C) and Bank of America Corporation (BAC) could not look worse. Breaking down out of handles. Just awful behavior there. There's nothing to suggest that things are about to turn up for these stocks.

The market is telling us all to avoid this diseased area of the market which still has the financial crisis over hang to deal with. This hasn't prevented the market from climbing upward, but you have to be so careful where you place your dollars. The commodity, which has been best, is trying to bounce off of oversold as they were pummeled last week. Now we get to see if the move down was for real or just simply an unwinding of some form. The next few days will tell us if this sector is about to be lost from a bullish perspective. If they do start to fade, the market should fade with them. Sentiment is awful, and this also tells us to not bet the house on the long side here. Just because the daily charts look great at this moment in time doesn't mean the market has an all clear signal here, because it does not, so please adjust your thinking.

One thing you have to pay special attention to is earnings. Whether things are continuing to move along positively for the majority of stocks, or whether the trend is starting to move down. The early results are fabulous for the bullish case lasting a long time. Even if the market were to pull in 10-15% due to the headaches mentioned throughout this newsletter, earnings are very strong and would likely act as a buffer to the selling getting out of hand. Most areas of the marketplace are reporting just super earnings and the stocks are being rewarded.

Good news isn't getting looked past as an afterthought. Good news is equaling higher stock prices, and that is classic bull market action. When strong earnings reports get sold that's when you know you have a real problem to deal with. Night after night the majority of stocks are moving higher on their reports with a high percentage of them raising guidance as they look ahead. Maybe they're all clueless, but you have to figure they know what they're looking at, and things seem to be very bright in their eyes.

Most factors that get figured in are bullish, but there are those two massive headaches to deal with in sentiment and those nasty looking weekly charts on the S&P 500, Dow, and Nasdaq. If they weren't so bad looking I would think this market would rock higher short-term, but getting through the old highs is going to be VERY difficult for the bulls now. We can make another run up to the old highs, but getting much beyond that won't be an easy task. Will look for the proper set-up here and there, but the best thing you can do is stay mostly cash, if not all cash, for a little while longer. 1370 S&P 500 and 2887 Nasdaq are the old highs, so watch those levels for guidance. 2778 and 1323 are the key support levels to track.

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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