All Pop and No Fizzle

The market did not take long to correct the oversold conditions we discussed yesterday. The S&P 500 ($SPY) bounced off medium-term support right around $208. But (there is always a “but” after a gap open like yesterday), was not able to break short-term resistance at $212. Overall the market performed very well yesterday but in the short-term it is not time to sound the all clear.

There are three sectors that are still in short-term down trends; Consumer Discretionary ($XLY), Tech ($QQQ), and Industrials ($XLI).

I am watching the Discretionary sector the closest since Retail Sales are going to be announced this morning.  A break above the $77.75 level in $XLY would be not only positive short-term for the sector, but could be a nice catalyst for the upside to continue in the overall market.

Small-Caps ($IWM) continue to lead breaking resistance at the $125.5 level. This catapulted the price action to the upside, along with some solid relative strength. This is a good signal for small domestic companies here in the states and a good short-term barometer of domestic economic health here as well. Of course this only holds water if the Small-Caps ($IWM) remain stable.

Bonds ($TLT) continue to be in a major slide. I do not see that trend shifting unless you can break $122 on $TLT. The Dollar ($UUP) has given back over 60 percent of its rally that started in mid-May, bouncing off of the lows of $24.50. Breaking $25 on the Currency ETF, $UUP has the trend now to the downside, and the big catalyst for this move is the pop in the Euro Currency ($FXE).

Have a good trading day.