Back to Square One

The S&P 500 broke through several levels over the past few weeks, and now we are back down to the low-1340’s, which marked firm support back in February and early-March of this year. In addition, that area was tough resistance in many spots in 2011. So, this will be a bit more significant of a level than the ones we have already breached. Despite that, though, we are witnessing a relatively weak bounce thus far this morning. Regardless of how important a price level may seem, if buyers do not show up in size and sellers have not exhausted themselves, down we go. So, it would behoove you to not assume anything here.

I also see the coal stocks like ANR are not bouncing where they should. As I noted yesterday, when that happens it is a sign to keep your guard up even more than usual, as a wash-out event before we actually bottom becomes more of a possibility.

If the bulls can sustain a broad-based move higher throughout the session, it might very well represent a subtle change in character. However, this is still a market where letting the strong bulls reveal themselves first is the prudent decision. We are back to square one after yesterday’s breakdown, and the onus is on the bulls to turn the ship around.