The bears tried today to take this market down yet again. Give them an A for effort, but an F for results. For now that is.

This failure doesn’t necessarily mean their attempts are over, and that they won’t soon succeed. But you have to recognize what took place today, and simply say they couldn’t get the job done. We tested the 1262 gap top level numerous times, but the bulls wouldn’t allow it to crack. That would have then taken things down to the lower part of the gap at 1257, which separates things from more bullish to slightly bearish short-term. The bears banged on 1262 over and over today but they did not make it. This doesn’t change the fact that the market still has higher risk these days, and thus, you have to play appropriately. It means you can have some exposure, but never more than three plays for the time being.

The market is still not printing the candle that says the selling juncture has started big time. Until it does you have to respect things for what they are, and clearly, the market is still very bullish in nature. Some exposure, yes, but lots of exposure is not the right way to go about things. You buy the best set-ups, and today did flash a few good set-ups as things unwound a bit, which is where you go with your plays. Bottom line is things are still setting up on individual charts while the overall market hangs in very well. Three attempts by the bears to remove 1262 from their minds. All three have failed thus far. Tomorrow’s another day. The tails on the 20-day exponential moving averages tell us there can still be upside, even from these lofty levels.

Earnings season began tonight. Isn’t it always earnings season? It sure does seem that way. Tells me I’ve been doing this far too long. Alcoa, Inc. (AA) came out with solid earnings, but had made a nice run ahead of the report, thus, after an initial move up it went red a bit after hours. Nothing bad about the report and they said things looked real strong for 2011/2012. That’s faith when you go out a couple of years. It may need time to unwind a bit but the stock should hold up fairly well in the months to come.

There are only two other big reports this week, and they’re big time reports. Intel Corporation (INTC) on Thursday and JPMorgan Chase & Co. (JPM) on Friday. My gut feeling is the reports across the board overall are going to be very strong as those smart CEO’s have lowered the bar. How much is built in to these stocks is an unknown at this time, but if guidance is strong it’ll be hard to kill off the strong ones. There are always disappointments, and they will get smoked, but the majority will be very strong.

I think earnings, more than anything else over time, will be the catalyst that will help this market have another strong year when we see December 31, 2011. There is no mistaking that the best of the move has been made over the past many months. That doesn’t mean individual stocks can not do very well from here while others struggle mightily. It is ultimately all about picking good stocks that are not overbought and that have pulled back and unwound their oscillators. No guarantee that’ll work either if the market decides to throw in the towel for a while, but you have to maintain some exposure while the market tries to grind higher. This likely means getting caught in a play or two, but that’s the price you have to be willing to pay. You can stay all cash until the big push down comes, but again, there’s no way to know when it will, thus, you hang in there for a while and see how it plays out with some small exposure in strong set ups.

1262 is the top of the gap the bears have to eat through, so they can then fight the bottom of the gap at 1257. Only, and I mean only, when the bears can close this market somewhat below 1257 can they start to feel better about their prospects for the short-term. Anything else is just noise. The bulls are fighting the 1280 area, and for now, this is acting as big resistance. Sentiment issues are somewhat unfavorable and the weekly charts are all, basically, touching 70 RSI’s. Some daily RSI’s are now a bit below 70, but the combination of daily and weekly overbought conditions isn’t the best of news for the bulls short-term. Be very careful out there.

Peace,

Jack