The market futures were quite a bit lower last night ahead of today's very important ISM Manufacturing Report due out thirty minutes into the trading day. As the night wore on, the European markets started to bid, and, thus, our futures bid up as well. We were green by the time the day started, and as the day wore on the market rose further and further leaving the bears scratching their heads in wonder.

They were trying to figure out how a weakening economy would still allow for a market rally. They're not necessarily understanding the topping process of a bull market. They're also clearly not understanding the unwinding that's taking place after we reached minus -10.4% on the bull-bears spread. The pessimism reached very intense levels, which allowed for higher prices. Too many shorts in the market. You know the story once that happens.

That was a drop of good news out of the blue, and often no good news needed. Just simply too many shorts, and up we go. That process is unwinding fairly rapidly now, although, the numbers are still favorable for the bulls. It should last for many weeks out, but will ultimately get back to the first warning area of 30%. All in good time, but, for now, the bears are paying the price for getting way too pessimistic short-term. A solid day for the bulls at the 2100 area on the S&P 500. We're now less than 2% away from testing the old highs at 2134, which is where things will get tough for the bulls. The reason is simple. A triple top, which is where the bears will fight with everything they have. Also, at that time, if we get that high, the RSI's will be at, or over, 70 on all the major-index, daily charts. We should stall up near the old highs. Anyway, for now, things are still solid for the bulls. But getting very close to daily-chart, overbought conditions. So, be wise how you choose from here.

The ISM Manufacturing Report came out today. Things are deteriorating quite rapidly. Anything below 50.0 is an economy in recession. What's scary about the report was the expectations were actually for a reading of only 50/1. Talk about walking a fine line. The number came in at 50.1, or just a hair over expectations, which is still frighteningly close to recession. The market yawned it off and headed higher. No explosion up, but the bulls couldn't be upset over that. The fact that it went higher is a miracle unto itself. Head down approach as the bears are covering those shorts. If the economy continues down this weakening road, we will be in recession shortly. That may match up with the end of the bull market, but whatever the market does, it's clearly not trading on the economy.

It's all about unwinding pessimism and once it does, the market will trade off the economies around the globe and for the moment, we can't be happy with the reports were getting. One negative report after another. It's becoming do or die time for our economy here at home and abroad. Not sure what can be done to stimulate it properly other than giving checks to everyone under a certain salary and hope they spend it. Forget giving it uselessly to the banks. Give it the public directly and let them spend away. They almost always do when they have a few extra dollars on their hands. While we cheer the market as it edges higher, there's nothing to cheer about with regards to the real world economies.

Short- and longer-term charts are getting overbought, thus, a pullback of some kind can occur at any moment, but now we focus our eyes on key support. A healthy market with gap ups does not surrender those gap ups easily. The bulls will use those gaps to enter back into long positions. S&P 500 2052 to 2058 is a strong, gap-up area that needs to hold onto any larger selling to occur off the top when we get a true topping stick. The market is far enough above right now that we can see a decent selling episode and still hold support. 2134 is resistance, of course, and that will need to be watched closely as well. Getting too overbought as we are, we start to look for that topping stick. A day at a time for now as things move along, but bigger picture, we're now focused in on S&P 500 2052/2058 and 2134.

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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