The market is very due for a pullback. You can even make the argument that it's due for a real-selling episode. We have been very overbought for two days running, which is rare, on the sixty-minute short-term charts. 80 RSI, plus on the Nasdaq on those short-term charts, which is unusual. It looked like it was going to be a nasty selling day, but that was not the case. The market did try to sell once the huge warning hit pre-market from United Parcel Service, Inc. (UPS), a leader in the transportation world. They said things are terrible globally. The stock itself got slaughtered today and took other stocks related to it down.

Yes the market held up. Why? Because for every UPS, we had a Wells Fargo & Company (WFC) and JPMorgan Chase & Co. (JPM). Both had wonderful news on their earnings reports. That has been a staple for this market for quite a long time. When someone important says or does something bearish, someone else comes along to save the day. Classic bull-market action. There just always seems to be good news from somewhere when the market needs it. So today we had bad news from UPS and The Boeing Company (BA), which had airplane troubles, and still the market held well. The Nasdaq led as usual. When all was said and done the market showed true bull-market characteristics, but there are some red flags. More on that shortly.

The red flags I'm a bit concerned about are the AAII Survey, which is showing a very high number of bulls to bears. Now you know I rely on Schaefer for my insight on sentiment, but it's hard to ignore some of the numbers coming out of the AAII. It's showing complacency. No other way to say it. Bulls at a multi-month high with bears at a multi-month low. The spread over 30%. Not great. It will be interesting to see the Schaefer numbers on Wednesday of next week. It's worth keeping a very close eye on.

I'm never in love with the market when it gets too complacent. The other headache is the Nasdaq and how overbought it's starting to get on multiple-time frames. The sixty, daily, weekly and monthly are getting overbought. It can stay overbought in a bull market, but it is getting overbought on many time frames, which bothers me to some degree. There's some complacency and there's overbought to deal with, so I'd stay away from getting too aggressive in the very short-term. It is best to use real weakness to buy.

This is the big week for earnings reports. We have all the big names coming out next week. Everyone from Google Inc. (GOOG) to Goldman Sachs Inc. (GS). How they report their numbers will go a long way to understanding whether the bears can remove the key support level of 1628. That tough resistance level now turned support is all the bears want to focus on and remove over time. If the numbers next week are solid from the biggest reporters, it will be very hard for the bears to get more than overbought pullbacks. The bulls will gobble up weakness, so next week is huge for both sides. We'll know more shortly about whether the red flags are going to be problems or not.

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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