The market sold off a bit in the morning before the buy the dip crowd rushed in. However, the afternoon was a sideways affair into the close. Lets zoom in to the 60 minute SPY chart.
SPY did not make it up to the resistance line today. Breadth has been over 60% positive the last two days, but SPY was unable to break out. Transports and the SOX were strong today and there was modest strength in small caps. Big cap stocks notably lagged with the Dow down a bit on the day. Lets take a peak at the current breadth chart.
Both breadth indicators have been positive since the Dec. FED meeting. The last two years I have seen SPX climb higher on negative breadth for weeks unlike any other time in history. So I find it rather odd that it is struggling to go up with pretty strong breadth. Something is holding people back from bidding up the big caps. Could it be earnings? As of last Friday 53 SPX companies had reported. Only 57% beat expectations even though those expectations have been lowered considerably. The average has been 73% the last four years according to FactSet. Past earnings seasons have started very well because many of the financial stocks report early and they have provided most of the earnings growth. With the season off to a slow start the question becomes will it get better or worse as we go along. I think that will ultimately determine whether we go up or down from here.
I will be watching for a break of the 1820-1850 range for the next directional move. In the mean time
price action is likely to be sloppy.
Bob
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