Another Run at Resistance Doesn’t Hold

The S&P 500 index made a new intraday high, but couldn’t hold the gains into the close today. A move to 1958 by lunchtime put the index at a new high and then came the drift lower throughout the remainder of the day closing at 1847 just shy of the 1849 level needed. Tomorrow is another day, but the drift lower in the afternoon is something we will watch and see how it responds tomorrow. As we stated in the weekend update the market is still looking for a catalyst on the upside. Thus, the need to be patient and let this all unfold.

Moves worthy of attention:

Natural gas fell 5.7% on the day after hitting a new high last week. Talk of more cold weather last week sent the commodity up 18%, and today, one would assume this was profit taking as futures expire tomorrow and Wednesday. The volatility is being caused by anticipation of demand rising on weather issues. This does not sound like a smart idea or a good bet, but the key is to find the fundamental reason for a shift in prices. Stops at $26.50 were hit today on the commodity and FCG,  the ETF for the Natural Gas, moved higher as stocks in the energy sector came to life as well on the day. Watching to see how it responds going forward to the selling today.

Speaking of energy (XLE) the sector made a run at resistance today, but couldn’t find the enough buyer conviction to take it above the $88.50 mark. The ‘V’ bottom reversal off the February 3rd low remains in play and the run higher in crude oil prices has been a key catalyst in the move short term. This is another sector that we need to see some follow through on the upside as well as some protection on the downside should the trend shift. $87.20 makes for a good exit point on trade positions.

Gold makes another move higher closing at $1337. Technically that breaks through the $1323 resistance level in play the last week and puts the next target at $1360 and stop at the 200 DMA. $1221 was our initial entry point for the bottom reversal an it has continued to make a move to the upside. There are still plenty of doubters relative to the price of gold, but the micro uptrend is in play and until there is a change in direction we will go with the short term outlook being positive for gold.

The Russell 2000 small cap index likewise made a run a the 1181 resistance point and failed to clear the previous high. ‘V’ bottom again in play and now we watch to see if the upside follow through is strong enough to make the move higher. Patience and 1155 stop on the index for trading positions only makes sense at this point of the move.

Overall the market made some solid moves on the upside, but the worries remain as we see the late day selling as a sign of concern with more of the sector indexes now hitting key resistance points and no clear catalyst or definitive move to new highs. Patience is the key ingredient as this plays out. There is nothing wrong with paring gains and letting the upside validate the moves and justify the gains. If the breaks higher occur we can always add to positions as it unfolds. Remember plan your strategy and follow your plan.