The underlying weakness that I wrote about this morning proved to be too much of a drag for the senior indices to stay firmly in the green. At the time of this writing, the S&P 500 and Nasdaq Composite are flashing red, and quite a few momentum players who bought this morning find themselves trapped in positions. WIth that said, we are far from witnessing any kind of dramatic breakdown or reversal. Rather, the market simply did not have enough juice in the tank to blast through the outer limits of our trading range, for now at least.
This type of price action is not sufficient for me to turn bearish or move to 100% cash, quite yet. Instead, it is merely enough for me to put initiating or adding to existing longs on hold for the moment. I would turn more cautious if we lose and close below Friday’s lows in the broad market. The 30-minute chart of the SPY should illustrate that this development would force me to respect the fact that the bulls would have been turned away from resistance and the upper end of the trading range in general. On the S&P 500, this would translate into a close below 1322.
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