Jack's Wrap - So Close..Needs A Gap...


Wednesday September 15th 2010
So Close..Needs A Gap...
by Jack Steiman www.SwingTradeOnline.com

Normally, when a market is close to breaking out, but is up against particularly difficult resistance, such as 1131 S&P 500 is, it usually takes a gap up in the morning to get the market juiced enough to make the move. Making such a move intra-day is not at all easy. It can happen that way, but a gap up is the usual way it occurs, and here we are just six points away. A strong group of economic reports in the morning could do the trick. We get jobless claims and PPI pre-market. Then once the market opens, we get the Philly fed report on manufacturing. That will be a huge report.

If all of these reports come through market positive, we just may get a gap up that holds and puts 1131 in the rear view mirror a bit. However, there's no guarantee the reports will be good. This is why we are long but not overly exposed. Appropriateness. Even if they do come through, there's no way to tell for sure that the gap up move would hold. If the numbers are bad we will gap down and fail once again right in front of that pesky 1131 S&P 500. The bulls can sniff the breakout, but nothing is easy in this sideways market. We must respect that all we've done overall is move laterally for nearly four months. Most think it'll fail here, but I think we'll find a way to get through. Even if we do we'll start getting overbought on the daily charts, thus, please keep things balanced. Interesting day ahead tomorrow.

We got those new sentiment figures today and it shows that even though things have been more positive from a stock market perspective, bullishness is not ramping higher. Still tons of doubt. Even with last week’s market gains the bull-bear spread is still only 5.6% more bulls. I would have thought more, but when I listen to the talking heads on TV, I am not surprised because the majority I hear talking are saying this market will not move much higher at all. There is enough doubt still out there to help this market make the breakout from a sentiment point of view if we get the right economic reports tomorrow. We'll need to see the bull-bear spread get well up in to the teens before it becomes more of a neutral indicator.

There are a lot of folks saying how bad things still look on there semiconductor front. We showed a chart today that tells us that things certainly aren't great. No one would argue that, but we do have buried oscillators on the daily charts along with positive divergences on the MACD, along with a nice pattern in place. If this pattern holds it should move the semiconductors higher in the days and weeks ahead. It has a lot of work left to become healthy, but it is slowly trying to repair itself. The bulls are going to need this sector along with the financial stocks to have any chance of breaking out and holding on to that breakout. These two sectors must be very closely watched in the days ahead for more signals about whether that repair seems to be going on now continues or not. If it does continue, this market will plow through 1131 S&P 500. Big moment for these two critically important areas of the stock market.

S&P 500 has strong support at 1115 down to 1105 with the breakout as we know at 1131. The Nasdaq is right at resistance at 2300. A break through 2300 cleanly is huge for that index, and the market in general. S&P 500 above 1131 and Nasdaq above 2300 is very bad news for the bears. They will try to defend but will have to cover should we start clearing on both indexes at the same time. The action has been solid so let's see if we can get the move through 1131 and 2300 and force more short covering. Some long exposure but nothing aggressive for now.

Peace,

Jack


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