The events in Libya and Bahrain have sparked a sell-off and a risk-off stampede in the last couple of days. While there has been some minor technical damage done, I hesitate to call this an intermediate term top unless I can see further signs of technical deterioration. For example, the SPX remains in an uptrend that began in September and it is now testing a minor support level.
Cyclically sensitive commodity prices are still on a tear. While the softs, which had been showing huge strength of late, got clobbered, gold and energy rose and the CRB Index staged an upside breakout and rallied to another high.
Some of the other indicators of cyclical leadership that I talked about here are still flashing bullish. As an example, the cyclically sensitive semiconductors remain in a relative uptrend against the Technology sector indicating that the cyclical risk-on trend is staying intact.
The tone of much of the commentary I heard late Tuesday showed that a high degree of nervousness. As well, Scott Grannis points out that the US economy is benefiting from some fundamental tailwinds, which could be sources of positive surprises during the 4Q and 1Q Earnings Seasons.
Given the level of skepticism in the rally, evidence of improving fundamentals and continuing evidence of a bullish intermediate trend, I would be inclined to lean bullish until we see evidence that the bears can significantly follow-through on the last couple days of market weakness.