If you want to try to understand on a deeper level what it means to have a disconnect just look at the behavior of the commodity stocks. If the world was really in good shape, and we had real growth everywhere, then these stocks would be on fire to the upside. They are acting as if there's major deflation going on. And in the real world we do have deflation. Mr. Bernanke's liquidity supply is keeping the market up, but that's not the real world folks. It's so hard to wrap your head around the bigger-picture market action when you consider that things really are in bad shape globally, especially throughout Europe. We have had a plethora of terrible reports over the past two weeks. Again, let's go over all of them.

Today was saw very bad numbers in the world of retail sales. Make all the excuses you want about the weather, but bad is bad. The numbers were in the red when expectations were for very green. The weather was taken into account before that positive figure was thought about. Reality says it wasn't the weather, but people reigning it in. Things aren't good enough, economically, for folks to be throwing about their dollars in the retail world. Haphazard spending is just not part of the picture. We know this is true when we look at other reports from the economy. Jobs were not there. Jobless claims are rising. Manufacturing is nearing recessionary levels again, barely over 50.0, the level that defines growth versus contraction.

The Michigan survey today dropped hard. Folks just aren't feeling good because their dollars are eroding. Health care is higher. Food is higher. Salaries are lower. Jobs are declining. So yes, commodity stocks are dropping because global forecasts are eroding as well. That's not reflected in Disneyland, I mean the stock market, but it's the real deal. Things are deflating in terms of demand. The only thing on the rise is what we need most, food and health care. So today we didn't see much selling as the dollars rotated as usual, but quietly you saw the real world take hold as commodity stocks got rocked down yet again.

They run to places where they can hopefully get some better returns. That place is our country where things are bad, but where we have a Fed who won't stop pumping. Our circumstances stink, but they're still much better than just about any other country on the planet. And folks, that's a very sad statement. That said, it is what it is. The money will pour in to where the risk is least and right now, with things such as they are, our country has the best to offer, although it isn't anything to be proud about.

The bears still haven't done a thing in terms of getting the bulls to shake a bit in their boots. Sure, the occasional gap down has occurred, but nothing that has lasted in terms of gap and run lower throughout the entire day. It's been more of a gap and recovery, or gap and sideways type of candle sticks. Nothing to suggest a much deeper selling period is upon us for a while to come. It can happen at any time due to the overbought nature of the weekly and monthly charts, but they can stay overbought as we know all too well by now. Everyone is waiting for the big sell for many months now that just hasn't happened. Many folks are losing their shirts playing the dark side without any evidence it was about to take hold. Only the overbought conditions were in place but no major reversal sticks yet many were jumping because they felt the market should fall.

It just doesn't work that way. With the bigger picture trend firmly to the up side, it's best to use weakness to buy rather than try to nail plays to the down side. With the markets so overbought it's still best not to get overly aggressive in the short-term but that doesn't mean you can't have a little exposure along the way. Just know to keep it light, but also remember that the trend is truly your friend. Don't over analyze as I spoke about earlier in this report. Play what you see. Don't play with your intelligence. Play with what's working. Support on the S&P 500 comes in at 1570/1560. Only a move below that should get the bears excited. Only a move below 3200 Nasdaq should get the bears excited.

Have a nice 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.

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

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