The markets finished up today on strong economic reports. The Financials (NYSEARCA:XLF) showed relative weakness as they barely participated in the rally. The Russell 2000 (NYSEARCA:IWM) showed slight relative strength today. It is important to note that on a daily 3-month chart, both the Russell 2000 and the financials are relatively weak compared to the Dow Jones Industrial Average (NYSEARCA:DIA), the S&P 500 (NYSEARCA:SPY), and the Nasdaq (QQQQ). This rally cannot be sustained if the financials and Russell 2000 continue to show weakness. The S&P tracking ETF, SPY, tested the highs for 2009, but was unable to break above the 111.7 mark. The Dow Jones Industrial Average punched out new highs for the year today. The Dollar dropped .65% today and Gold finished up 1.5%. The TICK, TRIN, and VIX all corroborated today's move higher with a comfortable degree of certainty. The VIX dropped 10.5%!
If you caught my Post Market Analysis yesterday, you will notice that the monthly chart of SPY has broken out of its down trend. Technical analysis marks that as bullish, but it is hard to get excited about the breakout at this point in time. I might consider going long here with a tight stop on the monthly time frame. However, I have been sitting on my hands for the past two weeks and am currently unsure as to when I will step back in. I need to see cleaner price action with confirming volume. Otherwise, without those criteria and with no clear patterns developing on the daily chart, I cannot bring myself to trade the markets in either direction.
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