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S&P back below resistance... or is it?

|Includes:JNK, SH, SPDR S&P 500 Trust ETF (SPY), TLT, XLP, XLY

The S&P broke slightly above its trendline resistance and the 200 day moving average.  Not enough to be conclusive.  Monday brought no clarification and Tuesday brought a steep decline.  The sell-off isn't conclusive short-term topping action though, as it looks different depending upon whether your looking at SPX (S&P Cash) or ES (S&P Futures).  The SPX hitting a price level (1260) that had been support and has since been resistance a few times.  It is now sitting close enough to the downward trendline that it may act as support here.

Not so in the Futures, where the S&P has broken solidly below the trendline.  You can see Tuesday's sell-off took /ES solidly below the trendline.  It's also notable that the volume in this latest rally has been profoundly lacking (and declining as the price has increased).

Ahh... the subjectivity of where trendlines are drawn is an issue as well.  But we'll step back and look at the bigger picture.  A couple of ratios are still suggesting extreme caution.  First Consumer Discretionary (NYSEARCA:XLY) divided by Consumer Staples (NYSEARCA:XLP), which provides a hint regarding the degree to which  "animal spirits" are evident in consumers.  As you can see, this ratio has actually been declining throughout 2011.

And High Yield Bonds (NYSEARCA:JNK) divided by 30 Year Treasuries (NYSEARCA:TLT), which shows the amount of risk bond investors are willing to take.  As you can see the ratio hasn't rallied much since the initial August/September sell-off.