Yesterday, the markets did a repeat of the last few days in that an early rally ran into resistance causing the trend to reverse, and we ended up with slight losses.
Interestingly, there was no place to hide and red numbers dominated the computer screens. Stocks were down along with bonds, gold, oil and most country funds while the dollar headed higher.
Right now we seem to be witnessing a battle between the bulls and the bears, as recent market activity has shown lack of sustainable upward momentum. In other words, we have run into overhead resistance again, which translates to 11,500 on the Dow and 1,250 on the S&P; 500.
The pattern of the recent days, with morning rallies fading into the afternoon, is not exactly confidence inspiring. On the other hand, improved economic data might provide the support needed to break out of this pattern.
Today, we’ll be looking at initial jobless claims, housing starts and building permits. Supporting the early morning sprint were a better-than-expected CPI report and strong manufacturing activity. Providing the headwind and helping the afternoon fade was Moody’s announcement that it was putting Spain on review for a possible debt downgrade.
That caused the dollar to rally, and took the starch out of the upward momentum. The major indexes changed direction and slowly but surely slipped into negative territory.
As always, when the markets run into resistance, you never know which way the next breakout will occur; will it be to the upside or the downside?
Since no one can give me the answer with any degree of certainty, I let my trailing sell stops make the decision as to whether I should remain invested or not. I suggest you do the same.