Yesterday's intraday reversal at $1318.50 in the S&P 500 lifted the index so that it could close above the 50 day moving average. The 50 day moving average has not been well respected as of late, which is why we believe an area around $1300 would serve as better support for a bounce. Nevertheless the current level around $1330 remains important.
Financials were the relative outperformers so far this week and might have kept indices from diving lower faster. The majority of headwinds for the market remain however: Global debt levels – specifically U.S. and Europe, commodity volatility, U.S. unemployment, political unrest and more.
As such we prefer to remain cautious and today will first act as observers before doing much. The strength in financials the past two days again ups the probability of another rally, as discussed HERE.
The Russell 2000 has broken a significant uptrend line as well as its 50 day moving average two days in a row now. Individual cyclical stocks like AMZN, SBUX, PNRA including the semiconductors continue to trade punky and may well head lower again soon.
It's mixed signals this morning for us and we will remain seated until better setups arrive.
Keep you posted