Why are they huge? It's earnings season and the season is huge this year as the market is at lofty levels. If those earnings can't carry the day then the market is vulnerable to a large pullback over the next several weeks. It just needs a catalyst to sell. That catalyst won't come from the Fed so the bears must look elsewhere to find a reason to get more aggressive. The only reason I can think of, other than a disaster I can't wrap my mind around, is earnings. Tonight we have lots of very important stocks. Leaders if you will.

Lots of semiconductor stocks which are critical in understanding how the economy is humming along since chips are in everything. We have American Express Company (AXP), Intel Corporation (INTC), Xilinx Inc. (XLNX), and SanDisk Corp. (SNDK) in this arena. All are very important with the biggest focus, of course, on INTC. We also have eBay Inc. (EBAY), and the biggest of them all, International Business Machines Corporation (IBM).

IBM has been struggling since many in that sector have reported poor results thus far. A happy surprise from IBM would be nice. Tomorrow pre-market we hear from the most important rail stock and a recent alert, Union Pacific Corporation (UNP). They move just about everything across the country so we'll see how manufacturing is doing from that report. Then we get Google Inc. (GOOG) tomorrow after the bell and I don't really need to explain the importance of that report so it's do or die time for both sides. If the bears want to take this market down with some force they need some bad reports between this evening and tomorrow evening. If the bulls want to take out the old high at 1687 they will need some strong numbers from these leaders. The market is up there so the earnings reports hold more importance for the short term. It's fun time in earnings land.

There is a headache creeping its way back into our lives. The headache of sentiment. It is NOT at a sell signal just yet, but has moved into the first red flag zone with a reading of 32.3% more bulls to bears. It was in the upper teens not too many weeks back so you can see how fast the bulls have rushed back in even though we have not been able to clear through the old highs. It never makes me too happy when the bulls are over 30% more than the bears, and it really makes me anxious when the bears are below 20%, and right now they are at 19.8%. It doesn't mean you can't be long some exposure as you always should in an overall bull market, but when you're over 30% bulls to bears you shouldn't be getting overly aggressive. You try to find solid set-ups and you do your best to avoid overly high beta plays. Once you get over 35% on the spread the bigger red flag goes up. Last high was printed when we reached 36.4% bulls to bears. So while we're not there quite yet we are seeing a very rapid rise in optimism for now and thus some caution is clearly warranted.

The Fed spoke in front in front of Congress today and repeated what he said last week. Unless the economy comes alive in a way we haven't seen yet, he's going to be very market friendly with liquidity his game. If the economy were to suddenly explode with growth he would naturally pull down on the amount of help, but until things are truly healthy economically he will be there with free cash for the foreseeable future. He was grilled quite intensely today but he was cool and calm as always and refused to give in to the pressures of those who basically demanded he was causing problems with his printing machine and what he's doing with short-term rates. He simply replied with the usual that if he thought things were good he would raise rates and cut down on the cash each month. He then said that things are not good enough economically. For now, he stuck to his previous words of liquidity and low rates being what we need for now, and if that were to change now the economy would be in huge trouble. The market has protection still in place.

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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