Jack's Wrap - Market Refuses To Die....

Monday March 28th 2011
Market Refuses To Die....
by Jack Steiman www.SwingTradeOnline.com

Day after day we seem to hang in there better than most would expect when you look at things fundamentally. We have global problems. Japan has to deal with nuclear fallout after dealing with a major earthquake and tsunami. We know about the headaches in Libya. Portugal has default problems. Some of our own states here at home are dealing with bankruptcy with help from our Government. There certainly is enough out there to keep us wondering just how the stock market hangs so tough to the up side of the equation. Add in unemployment and a dead housing market and you sit there shaking your head each day you wake up and see the futures aren't bad at all.

I often wake up and think today's the day. Lock limit down. It just never happens. There were the usual problems overseas this weekend, yet we didn't fall pre-market. So up we went at the open, although it wasn't anything earth shattering. From there we got overbought again on the short-term 60-minute charts; thus, the usual pullback came along, but nothing bad at all. The Nasdaq under performed a drop most of the day but nothing earth shattering. Just a few heavier weighted stocks pulling things down a bit more than the Dow or S&P 500. In the end it wasn't an exciting day, but you have to feel good about the way it’s fighting through the classic wall of worry. A day the bulls can feel good about. Some unwinding took place. Deeper would be a bit better, but at least some took place. The daily charts remain far from overbought.

Oh, those nasty financials. A lead weight on the back of this market. Goldman Sachs (GS), Citigroup, Inc. (C), Wells Fargo & Company (WFC), Bank of America Corporation (BAC), just to mention a few. Can you just imagine how far this market would blast higher if those poor acting bank and financial stocks ever caught a real bid? The over hang from years gone by is still with this sector. The market understands, I gather, that the only reason they aren't collapsing further is because of Government Intervention. If they can't stand on their own two feel, then no one wants to really take a major risk getting too involved with them. They'd rather throw their dollars on technology growth companies. For now, it would be best if we held off from taking any new plays in this area of the market for a while longer at least.

Friday of this week we will get more insight on how this country is doing with regards to employment. Is it getting better? How fast are things improving? In other words, how well is QE2 working. If the growth is slow the Fed will want to try and keep printing in order to keep things status quo. If things are starting to genuinely improve you might start to hear for the first time in quite some time that they will be raising rates soon to curtail inflation woes that are really cranking up. Food, health care, and gasoline are out of control and only likely to get worse if those commodity prices keep rising. Bernanke likes to raise, but is clearly waiting on some reports that employment is rocking higher. Once he thinks this area is better he will take the foot off the gas and slow things down a bit. The market will probably respond negatively at first, but quickly bounce back once it seems that raising rates are not bad because the economy is improving. The report Friday will have some weight to where the market goes short-term. It would be nice to see some real growth.

This is a very busy week for the stock market. We have lots of other economic reports to keep a close eye on. Wednesday we get the pre-jobs report with the ADP jobs report, which hasn't been accurate with regards to how well Friday's big number will come in, but you have to pay attention to it anyway. I know the market will be. Thursday it's more about the jobs world as we get news on jobless claims. It's key to understanding how things may, or may not, be getting better for the average person looking for work. We also have the Chicago PMI, or purchasing managers report. A key area of the country to focus on how the growth in the economy is coming along. Back to Wednesday where we will also pay attention to the bull-bear spread and whether more fear is coming into the market. It got as high as 38%+ many weeks back. Now it’s down to 28%. 10% more bears is good, and thus, it's no longer an issue. However, in my eyes, the lower the spread the better it is for the bulls. By week’s end we will have much more insight on how the QE2 is doing and what to expect from Mr. Bernanke going forward.

Support on the S&P 500 is near 1300. Massive resistance is at 1344, or the past highs last seen. I think there's a decent chance we’ll get back up there over time. No guarantee, of course, but for now weakness can continue to be bought such as when the short-term 60-minute charts get oversold, or at least go back to decently neutral. If we do get back to 1344, or close, we will have some negative divergences to deal with. But no worries about that now. For now, we continue to believe that some exposure on the long side is the way to be playing.



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