Two factors were at play yesterday as a nice morning rally was derailed, which we’ve witnessed many times in the recent past.
One, the S&P; 500 came within two points of its 200-day moving average of 1,108 which, if it should get decisively pierced, can set off more buying and a new rally.
However, yesterday, computerized selling set in as we got close, which disappointed the bullish crowd. With a lower close today, the S&P; 500 has not managed to string together more than two winning days in a row since the middle of April.
Two, Moody’s downgrade of Greek debt to junk did not help matters and contributed to the selloff.
It was another day in the market with unanswered questions about any emerging trend, which means that a break can still occur to either side.
If you are eager to deploy some assets in domestic equities, at the very least wait until the 200-day moving average of the S&P; 500 has been clearly pierced to the upside, before making any new commitments. That would give some assurance, at least for the time being, that momentum has shifted from sideways to up.
Our domestic Trend Tracking Index (TTI) moved only slightly from Friday’s position and remains above its long-term trend line by +1.28%.