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Stock Market Gap Up ..No Blacks..P/C High All day...Solid Day For Bulls....

Stock-Markets / Stock Markets 2010 May 11, 2010 - 04:07 AM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleWell, what day for the bulls. The EU and the IMF got together over the weekend and supplied all the bad European economies with one trillion dollars of funds to make sure no one defaults and that everyone is happy. What's a mere trillion dollars amongst friends.

The new world order is everyone is too big to fail. If you're big that is.


The market loved the news and responded with the third largest gap up market history. The key for the day was whether or not the Standard & Poor's Depositary Receipts (SPY) would print a black candle showing on balance sellers once the market opened for trading. And here's the best part for the bulls. It was basically black all day until the last five minutes when it went from black to clear.

Exactly what the bulls would hope for and exactly what the bears would dread.

No gap and die. No gap and run, either, but with a 400- point gap up, it's impressive that the market held as well as it did, especially during the last few minutes of the day. No one was selling the news that came out of the blue. Has to be so frustrating for the bears as they had the bulls dead and buried. They were fully short only to wake up to the worst news they could possible hear.

Not another bail out!!

Yes, another bail out.

This caused them to give up again and run for shelter. They spent the rest of the day running to cover their short positions, allowing the market to hang in there very well. All in all a very good day for the bulls. The bears choked on this day. Can't blame them though. It's hard to follow through when a trillion dollars was just handed out to the needy

So now we have to ask ourselves, what next? We know that the 20- and 50-exponential moving averages are just ahead at 1175/1167 Respectively. We closed at 1159. The 200-day exponential moving average is at 1100. Now its show me time. Which side can break through with force?

With the market closer to the top now, one would think that this short-term run is close to topping out but that's unclear. How much of an effect will this bail out cause? No way to know yet. Only the action dead ahead can tell us. The daily charts didn't impulse very much on this rally but the 60-minute charts did. On any selling back down the indexes will form massive positive divergences. On any breakout, the daily charts will form a negative one. It's not easy is it here! The trading range is now defined by these 20's and 50's on the top and the 200's on the bottom.

Short the top and go long the bottom, is the way to play for now. If we break out, your risk is small if you short right near the top of the range. Same on a break down. If you go long at the bottom and we break down, your risk is small. Today is bullish. No other way to say it. 100% bullish with clear candles printed. That is undeniable but it doesn't we definitely will break out. It increases the odds but no way to know for sure. We need hard evidence. Best for now to simply short the top and go long the bottom until proven otherwise knowing anything is possible, but at least the bulls can feel real good about today.

Here's something that's very interesting. After the first few prints, the put call ratio was above 1.00 all day. The bears were piling in buying shorts on a day the market was exploding higher. That's good news for the bulls for sure. No optimism on this day. Most folks were thinking this was just a sucker's rally. It didn't act that way when all was said done. The bulls have to love that put buyers were running in all day.

Leaders led all day and most of them also finished with clear candles. At first it looked like most would print black candles but that didn't take place. When leaders show bullish sticks you have to say what took place was real and not just a fluke one-day event. If it was, they would have sold off hard as the day went along and this just did not take place. Apple Inc. (AAPL) Google Inc. (GOOG), and Baidu Inc. (BIDU) along with countless other leaders such as CREE Inc. (CREE), and F5 Networks Inc. (FFIV) all closed at, or near, their highs. Strong action. There were some laggards such as Goldman Sachs (GS), but the overall tone of the leading stocks was bullish.

Is it possible we just trade in a range with the 20- and 50-day exponential moving averages on the top and the 200-day exponential moving average at the bottom? Yes it is, but I get the feeling that won't be the case for too long. I can' say I know which way it'll break but you have to be encouraged by today's action. For now, the plan is to play tops and bottoms of the current range, which again, is between those moving averages discussed numerous times above.

I personally don't think this stimulus bail out nonsense is healthy long-term for the market, but my job is to try and identify the short-term, and for now, today bodes well but we're not above critical resistance yet. Again, 1174 is that number on the S&P 500. 1100 is the break down level. We still need a few more days to understand the full intentions of this market.

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.

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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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