Market Keeps Rolling Higher....
Fri September 24th 2010
Market Keeps Rolling Higher....
by Jack Steiman www.SwingTradeOnline.com
Taking folks by surprise for sure. Not many thought this was possible, but those oscillators did give hints to the possibilities. Now we see what happens when things align just right. Get those MACD's compressed down low in their cycle. Get stochastic's oversold and those RSI's down near 30. Add in some positive divergences, and best of all, get the bull-bear spread inverted, and you take the masses by surprise.
The market took on 1131 and made it through only to give it up one day later. A nice bear fake lower. Today it shot right back through. No hesitation at all as the futures exploded this morning, ignoring not the very best of action overseas. We gapped up beautifully and never looked back. Not for a moment. A trend up day, all day, with the markets closing on their highs.
The Nasdaq led as it was expected as the appetite for beta was there today. And I just love when that happens, especially when I’m on the long side of the market. When the Nasdaq doesn't lead it's not a good sign, but once beta is the play, I love the bullish side of the equation. An excellent day for the bulls for sure as 1131 was taken right back.
One thing I want to discuss, today, is the nonsense I'm hearing on the business television stations. You hear over and over how the market is being led up by only a very few stocks. That's complete and total nonsense. The advance-decline line since this rally began has been nothing short of spectacular. It's not just Apple Inc. (AAPL) and Amazon.com Inc. (AMZN), folks. It's across the board.
I study hundreds of stocks daily, and I can tell you for sure, this is across the board in all sectors. Look at today -- advancers led decliners by an average of 4.5/1. 87% up volume as well. Tell me how that's not the real deal! It's been this way all along. On down days the advance-decline line is never all that bad save the odd day here and there. On the strong days the advance-decline lines, along with all the other critical internals, remain strong. I can understand if it's just here and there that things match price to internals, but it's been a constant. So please don't believe those voices out there telling you that things are a lot worse than they seem. They're as good as they look folks.
When I look at the charts there are two things that stand out. We all know that the real laggards of this market have been the semiconductors and the financials. The semiconductors, in my opinion, have put in a significant low for the near-term. Strong oscillators abound on the daily SMH/SOX chart. The financials aren't quite as promising, but improving at the least.
The market could never really blast up without both sectors, but can do very well if one of them participates. I think the semiconductors are about to add on to the good action we've been seeing there the past few weeks. The financials need more work for sure, but at least things are a bit more promising there. Bottom line is I believe at least one of the two major headaches is behind this market, and possibly both, with one more week of solid action in the financials.
Now here's the key to a bigger picture bull market. The long-term down-trend line on the weekly S&P 500 chart comes in at 1160. I believe an index, or stock, must clear critical support, or resistance, by 1% to verify a breakout, or breakdown. Any move above 1160 S&P 500 will have the bears feeling heavy pressure to cover their shorts. Any move above 1171 will have the bears running to their machines to get them out at any cost.
Bottom line here is if the S&P 500 can start to clear 1160 with force, we may just be in a new bull market confirmed. Strong support remains at 1131 down to 1110. Nasdaq support comes in at 2350 and then 2300. Let's keep a keen eye on S&P 500 1160 if and when it gets tested next week. The bears will be desperate once again at this level. We'll also be near, or at overbought, at 1160 S&P 500, so that'll make the job of clearing 1160 on the first try a bit difficult, but let's watch how things work out next week.
One of the major factors to this week’s rise were the words out of the mouth of Fed Bernanke, who promised the world that he will do whatever it takes in terms of printing dollars to keep this economy afloat. Many will argue with this thesis, as will I, but it's not my job to let my emotions on this subject interfere with the market action taking place. I think it's wrong to leave the printing presses open to prop up an economy. If that's what's needed it's best to let things work out as they need to.
However, the market seems to like what it's hearing from our Fed. Promises to keep things from becoming of the double dip variety is what this market seems to want, and it feels, for now, that he is delivering on keeping this from happening. If the market likes it then I like it, regardless of whether it's morally the right thing to do or not. For now things are looking more positive. We will watch 1160 S&P 500 closely for more clues about much further upside potential.
