Negativity is building as sentiment is starting to sour all over again. Who can blame them. After a very hard fall over five and a half days, the market got extremely oversold a few times and formed positive divergences on the short-term charts. Those divergences in combination with being oversold kicked in today. A massive gap up that took out the last gap down a few days back left an island reversal stick on the 60-Minute Charts. Solid action. The daily charts started to get down there as well. RSI on the QQQ Daily Chart hitting 33 at the lows on Friday. Lots of unwinding has taken place on the daily index charts, and nothing bigger picture has broken down.

We haven’t come close to 1074/1101. On and on, so the whipsaw continues with lots of emotional banter in between. The whipsaw is driving many out of the stock market, and again, who can blame folks. But the key is to hang in there for the next year, or so, until the dirty deeds have been done in Europe. With negativity picking back up, and with some momentum indicators getting oversold, the short-term edge has to be given to the bulls, but not in a fashion that suggests doing anything foolish on the long side. The tough market days are here, and will be here for a very long time to come.

The market closed very powerfully today after the bears tried to sell off with about an hour to go in the trading session. This is what happens when the tide is turning some. Efforts to get the market down are bought up some as the market is not ready for any major down side action in the short-term. Even after the market closed, the talking heads on the business television stations said today probably doesn’t mean anything, it was nothing to get excited about, and that this probably can’t last.

That is what I mean by not believing. That’s why I think we closed strongly. The bears are loaded short-term, and will need to work that off over the course of the next few weeks. The strong close was a nice change of pace, and although it doesn’t mean a new trend is upon us, it was great to see the selling in the last hour get bought up at the very end of the day.

We have two critical economic reports coming out later this week. The ISM Manufacturing Report on Thursday comes out thirty minutes into the trading session, and the huge Jobs Report on Friday morning comes out one hour before trading opens up for the day. I feel very assuredly that the ISM will be a strong market mover. Can we finally start to break free a bit from the 50 number, which is the dividing line between growth and recession. The country is focused on how manufacturing is doing, and thus, the report has huge ramifications for how this market will proceed. Add in that we had great numbers on Black Friday, record numbers in fact, and the market could get an additional boost with a confirming ISM number. The Jobs Report should also improve a bit based on jobless claims figures over the past several weeks and months. The big problem is overseas, and whether we’re ready for a bit of a bounce up in the market. A good ISM Report and Jobs number will help things along.

The participation was everywhere today. That’s also more of a sign that things are going to rally a bit further over the next few weeks. If the rally was to be very short lived, normally you wouldn’t see so much participation across the board. Many sectors would lag, and we didn’t see that today. So that’s a good sign for the bulls short-term. The market will have to deal with some very significant resistance soon at S&P 500 1214/1215. The top of a recent gap down lives at 1215, and to make it tougher still, the 20-day and 50-day exponential moving averages are at 1214 and 1215. If, and when, the market can clear this level, there’s not much until 1235 to 1260. Getting through 1215 is the key for the bulls near-term. You don’t want to pull back too hard, and too far away from this level. If we can consolidate around this level for a while, that would be more positive action, and a sign that things are getting ready for a push higher.

Listen folks, I know we’re in a terrible environment. I understand the emotional aspect of it all. It’s not a lot of fun. But in time, things will get better. The years will go by, and the bear market will end. It many take a lot longer than we’d like, but that’s just the way it is. Try not to get too emotional with it all. Don’t over play, and things will never feel all that bad, even though making big money is not going to be likely for some time. The key is to out-perform, and wait for the time when we can all have a better experience over time. Patience will be the key from here.

Peace,

Jack

(We apologize for there being no charts today due to technical problems. We will have them available by Wednesday’s newsletter. Thank-you.)