So far, overhead resistance, pegged to be the 1,130 level of the S&P; 500, held twice yesterday, as the index backed off, but still closed within striking distance.
It seems to me that the rally from the lows of the trading range appears to be getting a little tired as the market may have gotten way ahead of itself. Evidence of more economic growth is nonexistent, but is the most important factor in sustaining this rally.
Yesterday’s weaker than expected growth in industrial production was largely ignored as was the announcement that the Japanese government sold the yen in an attempt to push it lower against the dollar. History has shown that those types of interventions can have the desired effect, but only on a temporary basis. Long term, all past currency interventions have failed.
Today, the market will face important earnings reports. Among others, FedEx is the most watched as it often signals the direction the economy may be headed. Additionally, initial jobless claims will be reported, which can always be a market moving event.
Try not to get too sidetracked by day to day fluctuations and keep the big picture in mind.
While we’ve bounced nicely of the bottom of the trading range, we have now reached the top level. To my way of thinking, smoke and mirrors will not be enough to push this market decisively higher.
Real supportive economic evidence will be (eventually) required to justify these lofty levels. In the absence of real facts, we could find ourselves moving back down to the lower end of the range in a hurry. Always be aware that markets move down a lot faster than they move up.