You know how bull markets work. They get a bid and after getting very overbought the prevailing view is that it has to have a big pullback. The masses wait for it, but it doesn't come on their time. Of course, the pullback comes when the masses get involved. The market is overbought on the short-term charts to be sure, but they can stay that way when key sectors have taken out critical resistance, such as we have witnessed from the S&P 500 and Nasdaq 100. The S&P 500 took out important horizontal resistance when it closed above 1897, while the Nasdaq 100 took out key resistance when it cleared the 50-day exponential moving average. It has continued to run once cleared, thus, the market has a bid again whenever it tries to sell.

We did try appreciably lower early on today, but that was mostly gobbled up by the bulls. Nothing crazy back up, but the lows were bought early on in the trading session. We know that getting too involved is tough on the soul due to those overbought conditions, but you try to gather up a stock here and there that has pulled back to a solid area of support and go from there. No guarantees whatsoever that any play will work due to market headaches that it's facing every single day now, but you do your best to find a set-up here and there that makes technical sense. Risk is high on each and every play, but you want to try to participate as much as possible without over doing it or getting involved with too much froth. We'd all love to have a full go forward signal in the market, but we don't unfortunately.

That said, you can't argue with today's overall action if you're a bull. The market, although it continues to try higher overall, has the usual headaches that make you take notice and give them respect. Poor-looking weekly and monthly charts along with a terrible bull-bear spread of exactly 41% more bulls to bears. That's plain and simple a sell signal. However, on the hand, we have a ten year at 2.45%, and this is exactly what keeps the market from getting slaughtered. Rates are just too low for the average investor to try and go anywhere else but equities. The thought of such low returns for so many years is a turn off to most. All of the returns are that way from the ten year on down, thus, the market doesn't collapse even though it should. So we play with the necessary respect the market deserves based on its problems at hand but also keep some exposure in the game. A day at a time knowing at any moment things can reverse down without notice.

The market also still has overbought short-term sixty-minute index charts across the board and this alone can be a quick catalyst for some selling. It's healthy to get some selling to unwind so you don't panic just because we sell some, but it's always in the back of my mind at least that things may be worse than they look simply because of the headaches mentioned previously. If the selling in the short-term occurs on very light volume without any disruption in the bullish oscillators we're experiencing at the moment then weakness can be bought. 1897 is now massive support for the S&P 500, while the Nasdaq 100 has its big support level currently at 4143.

Day to day folks. Nothing is easy here.

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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