Stocks Slip Amid Lack Of Support, Rebalancing

We have what the technicians call a little double top forming and we'll have to watch very carefully if we come back down and test the lows of last week around 878 on the S&P 500. That will be the line in the sand that will trigger stops, so keep it on your radar.

After a weak close last night and a poor response to earnings from HPQ, it looked like the market was ready to struggle again this morning. However, a huge secondary offering by BAC that was quickly gobbled up gave the bulls something to cheer about. Once again the bears were caught flat-footed and we end up with some short-squeeze-induced euphoria.

But what has made this market much more interesting lately isn't the choppiness of the major indices but the very strong momentum under the surface. Even with the red close, breadth was still positive and we had some big moves in select small-caps particularly in the solar energy group.

One group of particular interest was gold, which had some big volume and some good looking breakouts. It's a group that can be tricky to trade, but it seems weakness in the dollar is providing a tailwind. Market players have been trying to catch this group for a while and the recent pockets of momentum could easily shift to precious metals at this juncture.

After the market rolled over last Wednesday, a lot of folks were looking for more downside but we squeezed and bounced big on Monday with little volume, which helped reignite bullish optimism. With the rollover today, the light-volume rally on Monday is even more suspect.

Going into more detail, recovering from losses last week, a bullish bias has supported buying in recent sessions, which helped participants begin Wednesday with strong gains. The upbeat tone was supported by continuing gains among commodities and an early advance by financial stocks. However, stocks began drifting lower midway through the session and ultimately closed with a loss as participants turned against financials... Early gains were helped along by investors that chased commodities and materials stocks, which have benefited from the assumption that stronger economic conditions in the back half of the year will rekindle commodity demand. A weaker dollar has also helped bolster commodity prices... The minutes from the April FOMC meeting indicated that participants project a contraction for real GDP this year, and that committee members believe the near-term economic outlook has weakened relative to the projections made in January. However, a recovery in sales and production is still expected to begin in the second half of this year... With the dollar dropping more than 1% against a basket of major foreign currencies, gold prices advanced 1.2% to settle pit trading at seven-week high of $937.40 per ounce. Gold stocks like NEM provided leadership to the materials sector (0.5%), which had spent most of the session trading with gains exceeding 2%. Meanwhile, metals and mining stocks climbed 1.0%... Oil prices built on the prior session's advance to register fresh six-month intraday highs and closing highs. The advance was helped along by bullish inventory data, which showed a 2.1 million barrel draw for the week ending May 15 while a draw of 400,000 barrels was expected. Crude contracts settled more than 3% higher just above $62 per barrel... Financials proved to be a weak link during the session. The financial sector spiked to a near 3% gain in the early going, helping drive the broader market higher, but the move ultimately collapsed. Financial stocks closed the session with a 2.4% loss... Though BAC showed strength after announcing that it raised $13.5 billion through a previously announced share offering following government stress tests, banks were among the sectors weakest performers. The KBW Banking Index slid 2.8%... Consumer finance companies (-3.5%) also showed considerable weakness amid continued concern that new rules are in order for credit card companies. Following the Senate's approval yesterday, the House of Representatives approved a bill imposing changes for the credit card industry... Retailers had a seesaw session, which saw the sector trade with a 3.0% gain before settling with a 1.6% loss. Despite the disappointing finish, TGT still logged an impressive gain following better-than-expected earnings... Dow component HPQ generated in-line earnings for its latest quarter and issued an in-line forecast for the current quarter. The company's upside outlook for fiscal 2009 wasn't enough to win it favor, though. The stock traded as a laggard among tech issues (-0.7%)...