Shortly after last week's Fed meeting, Zenolytics posted a short note titled, The Buying Window For Equities Reopens As Bidders Lurk.
In the final paragraph of that note a target of 3,000+ on the S&P 500 was observed as being perfectly reasonable by early this week given the importance of the level the market was mounting the rally from, along with numerous other factors working in the bulls favor.
The market cooperated for a time, moving from 2920 to a high of 2964 on Friday. That was, however, as much gas as the market had for this trip.
Therein lies the problem: Everything was in the markets favor over the past several trading days to put together a substantial move:
- Sentiment
- Price level started from (thrust)
- Price level moving towards (attraction)
- Interest rates
- Trade news
With all of the aforementioned positive factors, the 3,000 level - in all of its resistance laden glory - should have acted as a Star Trek level tractor beam, pulling the S&P up to this level for a decisive test of its will to move forward.
Instead, the markets got off to a glorious start and completely fizzled just as the window for a rally closed. Now we are in a volatile news window involving the G20 meeting, only to be interrupted by fund managers shifting their portfolios every which way but the right way into the end of the quarter. In other words, things only get sloppy from here. Volatility squared.
The message the market is sending after such an abject failure to take advantage of the perfect window to rally is that it continues to be in the mood to chop. And chop it will.
With headline risk only increasing as the week comes to an end, and with a holiday shortened, light volume trading week coming to start July, put a fork in the market until the week of July 8th. It's going to be a choppy, torrid affair until that point, at the very least.
Market leaders demonstrating considerable relative strength with perhaps a gold stock or two thrown in for good measure is the way of the wise for the next couple of weeks.
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