Of course we will, and the market is set up right here to do so, except thus far it hasn't. Three straight days of daily-chart topping sticks across all the major indexes. It hasn't mattered. The market refuses to sell. It really should from here. Overbought and negative divergences and major froth and.....! You get the idea. At least a small pullback, one would think. So today we were set-up to sell, and although we tried to really sell-off late in the day, over the last thirty minutes the Spy was able to rally back up and barely finish in the red.

The moment those short-term sixty-minute charts unwind out of overbought it seems the bid comes right back in. Nowhere near getting oversold. You go from 70+ RSI's down to the 60's or 50's, and then the buyers come in. Really interesting to watch as it seems forced by someone, but maybe I'm just over thinking things. Deep down I know it's about rates, but it's so interesting to see how difficult it is to just get the sixty minute index charts down to oversold for a moment or two. Froth still ruling the roost, while froth needs a lesson, but rates are still not letting things go lower for the short term, although, of course, we will sell.

Froth is back past the double red flag warning I use. Any time you get the bull-bear spread above 30% you start thinking things are risky in the market. When you get to 35%, or higher, it's a super warning alert about the probability of things falling hard in the near term. That hasn't been happening, and I know it's because of rates being so low, but after getting things down to 30.3% two weeks ago we raced back to 33% last week and now 37%.

I was really hoping we would run lower in the markets, and then we would see readings in the teens over time which would set things up for longer term. Sad to see froth never letting up, but I guess rates are more powerful than froth for now. Another breakout higher in the days or weeks to come and we will see 40%+ again and that's really not good. I know we all want higher stock prices, but you don't want another bout of 40%+ on the bull-bear spread. It's not good for mid- to longer-term. I guess it will be what it will be. All we can do is play what we see, and not worry about what we can't control. Froth remains a real thorn in the side of the bulls long term.

So how does one approach this market? Carefully! Respect the warning signals but clearly, for now, weakness can be bought. That's the key. Buying either market weakness or an individual stocks weakness. Chasing any vehicle higher makes little sense, since there's so much risk in the market currently. I still feel it's best to avoid massive froth plays with P/E's through the roof, or if they have no P/E at all. These plays can and do work here at times but knowing how risky they are is key because when markets do sell off, these are the ones that take the nastiest hits lower.

There are lots of support levels just below between gaps and moving averages, thus, for now, use weakness to enter, but never lose the realization that out of nowhere, and without warning, things can go south in a hurry.

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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