Jobs Offset The ECB... Market Flat For The Week

It was a very interesting week in many respects. There were at least three different times when it felt like a bear market and a bull market. The whipsaw continued with many of the usual head fakes for both the bulls and the bears. The action early on in the week was nasty with a strong downside bias.

After getting through many huge economic reports and events that shot the market all over the place, the market finished strong, allowing for a flat week of overall action. We had the ISM Manufacturing Report come on Wednesday, the same day we heard from Mr. Bernanke.

The ISM Report disappointed as it showed our country to be slightly in the red regarding recession. The 49.8 reading showed continued economic contraction. The number was supposed to show slight growth. A bad start.

Fed Bernanke was supposed to come to the rescue with some type of economic stimulus. He said and did nothing. Another disappointment. The ECB president, Mario Draghi, created the most despair for the bulls as his speech was much ado about less than nothing.

It took his disappointing report to finally hit the market. The futures intraday reversed three hundred points lower. However, instead of totally falling apart, we came off the lows and created nothing more than a slight down day of eighty eight Dow points. It was up one hundred plus pre-market and down approximately two hundred points intraday. You had to wonder why the market didn't tank out.

The news on Friday morning may have been the reason, as big money seemed to know the Jobs Report would be better than anticipated. Up we went, with the market hanging tough all day long. We closed off the highs, but not by much.

Solid action with the one good economic report trumped all the bad ones that came before it. The market is simply wanting higher. In the end, however, the market was flat for the week, but with most of the news being bad, especially out of Europe, you have to feel very good about that, if you're overall bullish.

When one studies the market, it's important to take a look at the internals. So let’s go over them with regards to how the market fell early on in the week. To gain insight, one should spend time looking at quite a few things. You start with the momentum oscillators.

Look at stochastics, RSI's and MACD's. You look at the daily charts. I love the six-month daily charts. During the move down off the top early in the week, even though price losses were solid, the RSI, MACD and stochastics didn't move down hard with price. They were all quite stable, a hint that things would not fall apart.

The momentum was not there for the bears. With the news terrible fundamentally, there was every excuse for those oscillators to fall apart. They didn't.

In addition, the volume off the top was weaker than the previous move off the bottom. Buyers were slightly more aggressive than the sellers. No volume, no strong move lower in the oscillators, and you get a market that won't take bad news all that hard. That's a reason for not shorting when it looked like all was about to fall apart. These things, when studied properly, can give hints about what overall market we're in currently.

While it has not a bull market for the past seven months, sideways action has to be looked upon favorably, considering what's taken place on a global level economically. The oscillators continue to say things are agnostic, but not really a threat to fall apart, which is what most are thinking when looking at sentiment issues. So far, the bulls have to feel pretty good about the dance they're currently doing to avoid a market meltdown.

It's fascinating, to me, to watch human psychology. What's the message it’s sending out to the stock market? How people feel about things is always fun to look at. The bull-bear spread is down quite a bit lately in favor of the bulls as they are ahead by only 11.7%. Those numbers were near 20% about a month ago, maybe a bit longer than that. So nice to see a lateral market be treated as if its falling hard.

The threat of events overseas has the bears rocking in. We're real close to single digits. and that's always a plus for the bulls. It's not an outright buy signal in the single digits, but it means folks hate things quite a bit now, and that's a nice contrarian indicator for the bulls. It'll be fun next Wednesday to see if those numbers actually went below 10%. I think there's a decent chance it did as the action most of the week was to the down side. We need to watch how this unfolds in the weeks ahead.

The market, when healthy, is led by froth or the Nasdaq 100. Valuations are ridiculous there, so when folks are buying these stocks, it’s an indication the risk-off trade is in effect. Bulls love this as buyers don't worry about much, except being involved with stocks that are wildly overvalued like OpenTable, Inc. (OPEN) , Amazon.com Inc. (AMZN) and others.

If the S&P 500, or better yet, the Dow is leading, that means it's risk-off time, and thus, things aren't really healthy. The Nasdaq 100 needs to drag up those other leading indexes, not the other way around. A lagging Nasdaq 100 is an unhealthy stock market environment. 2945 Nasdaq 100 is now strong support, or Friday’s gap up level. If we're really rocking now to the upside, any pullback should hold within a few points of this key level.

However, for this market to be considered truly longer-term bullish, the bulls have their work cut out for them. There's a massive gap that runs from the bottom at 3000 to the gap top at 3025. If the bulls can take out 3025 cleanly, and on strong volume, we could melt up. But that's a long way from happening. Some long exposure is appropriate here. We're near overbought on the short-term charts, thus, could pull back a bit at any time. But again, 2945 NDX should hold.