This is a market that doesn't want to let go of overbought it seems. Some indexes, such as the Nasdaq, are overbought on multiple time frames. Everything from violently so on the sixty-minute charts to plain old overbought on the daily, weekly, and monthly charts. The S&P 500 is not as overbought on all the key time frames, but it is within a hair of being so. In other words, risk is much higher now for a decent pullback of some type. You never know when it's going to kick in. No one does in a bull market, but the risk is so much higher now with regards to buying new long positions. They can work but the risk is getting very lofty so be careful with your exposure for now. Thing will set up better again in time, so exercise patience, even if we move up further first.

The market opened flat, and then spent the rest of the day selling off a bit only to shoot back up to slightly green. It's impressive from a bullish perspective that we didn't fall hard even though we're so overbought because we had a very poor retail sales report pre-market. That was the perfect medicine the market was looking for. At least one would have thought that to be so. Overbought. Poor economic report. Down we go. Not to be. The bull just doesn't let go of its grip. So yet another day at overbought, meaning another day of not unwinding. We can stay overbought, but this stinks for new set-ups. Either too stretched or just not participating. Need to be patient to allow things to set up again. Patience is the hardest thing to do, but work hard at it here. It should pay off in time.

We took Union Pacific Corporation (UNP) off today because it has earnings in a few days. The chart is showing negative divergences, so why not be safe with the market also at overbought. Cost we can hold for a very long time as they don't have earnings until early October. It has great potential to go much higher once the market resets. It may become a very long-term hold, but you never know what's coming. We still love the set up for the longer, thus, we'll see if we can hold this for some time to come. PFE is solid. A good play thus far. It has tried to pull back, but it has tested the 50-day exponential moving average at the lows for a couple of days now only to see it shoot back up.

Normally this is bullish for the short- to mid-term, thus, as long as it holds those 50', we'll try holding it as well, and see if we can get this to the 29.25/29.50 level, the next area of resistance. McDonald's Corp. (MCD) was disappointing once again today. This has become normal behavior, but it's still above the alert. If it loses 99.00 we get out flat. Good support at 100.50. Would love to see that hold but I'll give it room to key 99.00 support. Again, buying new plays here makes little sense. Also, no shorting with the trend higher. Would rather just let a pullback occur and buy it if things set up properly.

The best earnings reports have been coming from the banks. Goldman Sachs Inc. (GS) is out tomorrow morning with big things expected there. We have had earnings from JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC), and Citigroup, Inc. (C) the past two days, and they were all excellent. If the banks are strong the market should hold up fairly well, even if the market pulls back from overbought. It won't take long for folks to gobble up good earners. Once again, that would help the market hold its mostly bullish tone.

Always follow the earnings reports as you can take the best ones that get rewarded and buy them when they pull back with the market. They'll sell less and get bought up first. With the flow of earnings coming in rapidly here, you can expect good and bad nights. Use the weakness to buy the best stocks. Earnings have been solid overall, which helps the bullish bias, and thus, use weakness in the overall market to buy up the best. But once again, please recognize that we are very overbought, thus, caution is best for the very short-term. The bull market is still alive and well. 1687 key resistance. 1628 key support.

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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