Market Waffle on Uncertainty Looking Forward

And the winner is… resistance again. S&P 500 index still cannot clear the 1848 level on the close. Today was more of a back and forth day without much in term of conviction on either side. The clear winner on the day was retail up 1.2% and XRT cleared the $83.25 resistance on the close, which was right at the 50 DMA. no big negatives on the day, but then there were no big positives either. As we stated in the weekend update, looking for a week of consolidation heading into the February economic data reports. The economy has not been a bright spot and if the numbers don’t start to show some signs of improvement the downside risk begins to come more into play.

Sector Moves to Note:

China fell today as FXI gave up 1.8% on the day. Technically the gap lower to start the day with a close near the low of the day not helping the cause. Worries over the real estate sector continues to plague investors wanting to avoid speculative risk currently. The brief rally off the lows in February is not in question on the downside again. A move above $72.50 on FXP will make things interesting relative to the downside opportunity.

Some topping in Utilities (XLU) and REITs (IYR) is showing in the charts the last few trading days. Similar to that in the S&P 500 index the getting through the key resistance levels is going to take some type of catalyst. Today interest rates fell on the 10 year Treasury bond to 2.7% and it didn’t help the upside for either sector. Both are interest sensitive and declines usually have some impact. Trades in both sectors need to be addressed relative to exit points and the longer term view is to look for opportunity in a pullback or test lower.

Financials (XLF) still cannot make the break through resistance and is giving more opportunity on the downside near term. The short trade my pan out yet as we go forward. No upside follow through from the banks following the solid gains on Monday. Insurance and brokerage are both still making moves on the upside, but consolidating near the current high.

Treasury bonds rallied today as the yield on both the 10 and 30 year bond fell five basis points. TLT moved back above the $107.15 resistance. Watch to see if the upside gain momentum and if the bond sector remains in the short term uptrend. Bonds have been warnings that something may be wrong in the world of equities and we will take the cautious approach for now.

Biotech returns to the upside with a vertical climb in XBI the last three days. The broader healthcare sector was negative on the day and pharma was flat. Take what it gives, but keep your stops near by.

Running scans after the close shows little change in leadership short term. Off the February 3rd low the NASDAQ 100 index has been the leader followed by Russell 2000 Small Cap index. REITs are third and S&P 400 Midcap index fourth. Some sectors of interest off this scan are PBW, PEJ, RING and SOXX. We are seeing some signs of topping on the move and it is good to raise stops on trades and what the longer term trades relative to downside risk. We have to take it one day at a time and keep our eyes on the events taking place as the relate to the charts.