That's the bulls for you. Just when it looked like it was all over, and it still may very well be, they stage a rally after two open gap downs that held. A rally up, sure, but a gap up made little sense. Now we do know that the gap up was filled back down with some indexes actually going red at one point today, so there's no technical damage to the good work done by the bears over the past two days. That said, it was strange to see such a decent rally today. The score is currently two to zero with the bears in front.

We have to be sure not to get too bearish until certain key levels are taken out big picture, and, of course, those would be the 20-, and especially 50-day exponential moving averages across all the key-index daily charts. That is a decent ways off, so we must not over react to what has taken place off the top before today's move back higher. The bulls did look to be in very bad shape, and now they're working on trying to take back one of those gap downs, but that won't be easy. So don't get too bullish too quickly either. Basically, we still have a very uncertain market with both sides fighting here. Neither one has taken full control, but with the two gaps downs before today that stayed open, the onus is now more on the bulls to take back what they've lost from the technical damage created. Lots of cash is still a very proper position.

Those poor bulls keep falling all over themselves. The bull-bear spread came out today, and the numbers were very bad, if you want things to go higher with regards to equities without much of a fight. With rates on the side of the bulls, it doesn't take much to get the market to move higher, but with froth so rampant, it's hard to get sustained, consistent large moves upward. A 45.5% spread is bad news, and was down to 41% heading in to last week. This is now nearly two months over 40%, and to be blunt, that's really bad news for the bulls. Froth just won't give it up. It'll be forced to at some point, but that moment is yet to get rocking, although the bears are now at least really giving it a go.

The spread will have to come down over 20% in all probability in the months ahead, and that means so nasty down side action. You prepare for the inevitability of that, but you don't front run it as we all know very well. That trade has been a disaster for the bears. Do not play with emotion. The bears have made a good first step with the two gap downs, but now we need to see some critical moving averages go away, and froth alone doesn't have to be what gets that to happen. It can be any type of rate news, or yes, it can be just those terrible numbers. When we lose moving averages that count, such as those 20's and 50's, then we know froth has finally kicked in its sell signal.

The Fed minutes came out this afternoon, and they showed Ms. Yellen is really working on ridding QE help. It'll all be done now by October, and that's good to see. She believes the economy will improve enough to do that dirty deed sooner than later, although I don't really believe she thinks things are all that good. She also knows you can only force so much inflationary pressures on a rather weak economy. She knows it's too much pressure on the average American, so she'll get it out of the way and let the rates world allow the market to hang, which, of course, supports Main Street. That is all she cares about. She'll keep those rates very low for a very long time to come as the economy still isn't showing the growth it needs in order to allow rates to rise.

So here we are with the bulls and bears fighting it out. The only smart way to play is lightly, whether a bull or a bear, and allow the market to tell us more over time. The two gap downs will likely cap the upside for some time to come, while the bulls can use the 20- and 50-day exponential moving averages as their land of key support to hold things up as the oscillators, hopefully, unwind without too much price erosion.

Be smart and play appropriately as we learn what the markets true intentions are in the weeks and months ahead.

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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