So what else is new as they say. The bears have the bulls on the ropes. The bears look ready for a strong push to take the market down to support at the 1300 gap. The bears spit the bit. Bulls take over just enough to keep the market out of harm’s way from a technical breakdown perspective. And the story continues without a resolution. I don’t have to understand it and neither do any of you. It’s probably more to do with the fear of the Fed than anything else, but it is what it is, a whipsaw market that has both sides handcuffed. Nice looking set ups on both sides of the flat line that never complete themselves.

So many times, both sides go to bed thinking their time has arrived only to wake up the next day with a move in the opposite direction. After today, the bulls are probably feeling good about things and hoping the Fed will do some additional happy tidings in the days ahead. But they also recognize that inaction by the world banks, and the Fed at the European Summit, can take things down hard at the snap of a finger. I don’t think anyone should feel good until certain levels are taken out on price, and that’s to be discussed later on in this article.

It was an interesting day today from this point of view. Yes, the market was up quite nicely, but underneath the surface there were some leaders that had terrible action and broke down badly. There are massive losses in the automotive sector from stocks such as O’Reilly Automotive Inc. (ORLY) and AutoZone Inc. (AZO). Take a look at those charts tonight and you’ll see the losses were powerful, and on huge volume, which confirms the price losses. Also, many restaurant stocks got smoked in a big way. Look at the candlesticks on charts such as Panera Bread Co. (PNRA) and Chipotle Mexican Grill, Inc. (CMG), basically the two biggest leaders in that sector these past many months, if not longer. Horrible losses out of the blue.

On the other hand, there were strong gains on the oil front. They have been mercilessly killed for quite some time and got a huge move higher today, which was overdue to say the least. This is what gave the market its bounce for the most part today. Rotation continues. Retail stocks also got smoked today with the best of the best, Ross Stores Inc. (ROST), taking a strong hit lower on huge volume. Nothing comes easy in this market now, even on the good days. It’s just another reason to be mostly, if not completely, cash. So yes, it was an up day, but with a lot of bad action in leading stocks which takes away some of the good feelings that the overall price action brought to the bulls.

There is a vote on the President’s health care bill. It will likely be over turned, something I think the market will celebrate to some degree. That may have been part of today’s rally higher in the averages. Over the next few days, however, most of everyone’s energy will be focused on what comes out of the European Summit, which has the chance to be a strong mover for the market. I don’t how it’s possible, but if somehow good news comes out of it, the market should break easily over the 50-day exponential moving averages. Just watch 2889 on the Nasdaq 100, because in good times, the Nasdaq 100 should lead up. The Fed will be watching what does or does not get resolved overseas and will be ready to act if necessary. Again, even just the threat of action can have the bears on the run as usual.

By the close of action on Friday, these two issues should be behind us, and we’ll get a better read on the intentions of our market. It’s such a difficult call. No one really knows what will, or will not, be resolved, and thus, you should let the 2889 Nasdaq 100 level talk to you. Lots of cash before that break occurs is really the only way to play. If you’re bearish, shorting here makes sense as 2889 is only a half a percent away, thus, you can put a stop just above it on a closing basis. The risk is high on both sides. The bears, overall, are totally gutless, but the right tonic could get them rocking again, so bulls beware.

Keep things very light if not all cash.

PATIENCE!!!

Peace,

Jack

(There will be no charts tonight due to technical problems.)