The market has been enjoying a very strong bounce recently, as oil prices finally rebounded, but that correlation is cutting in the other direction this morning. Interestingly, it also appears to have a strong correlation with banks, which are trading down, and a strong inverse correlation with precious metals, which are trading up. Breadth is running about 2 to 1 negative, and there is weakness in the large-cap FATMAN names.
As I discussed in my prior post, the market has very obvious technical resistance at this level. Given how far it has run off the lows, it would be surprising if it didn't at least pause before trying to break through the 1950 level of the S&P 500. We just don't have a very good foundation for an attack on that level, right now. Of course it doesn't help matters that oil, which has been the main driving force lately, is trading down, but it certainly is what we'd expect on a technical basis.
My thesis is that we are going to fall into a trading-range market. This action is the first step in that direction. The overhead resistance will gain some strength, and we are already well aware that we have tested the lows at 1812. From a trading standpoint this would be ideal, but for many market players, a market always has to go straight up.
My Stock of the Week, Silver Wheaton Corp (SLW) continues to develop well, along with the whole precious metals group. Second Sight Medical Products (EYES), a small-cap I have highlighted several times, is acting well and I'm looking to build that position at some point.