Stalled Out At 1174 Again

For the third day in a row, the S&P 500 stalled out around 1174, which is the 50-day simple moving average. As I keep writing, technical levels haven't mattered much on the upside, but this one mattered today. The bulls made a number of stabs at it, but when they were turned back for the second time at around 2:15 p.m. EDT, the selling picked up steam and we took out the lows.

We did manage to hold yesterday's lows, a slight positive, but that big gap in the SPY between $113.77 and $114.91 is beckoning. The conventional wisdom, as well as the stats, support the view that this gap will eventually be filled.

Of course, betting on the downside has been a losing proposition for so long that it is tough to embrace the dark side. But the charts of the major indexes look very poor, and maybe this time it does matter. We have negative seasonality kicking in, as well, so if the bears are going to do something, this is the time to do it.

The reversal in the big-cap momentum names was particularly ugly; it showed how skittish market players are. The low-volume bounce this week just isn't a great place to be buying, unless you are extremely confident of more V-ish action in this market.

It should be a very instructive battle tomorrow. The bears have an edge here, but they have squandered so many opportunities that it's tough to have much confidence in them. They will need to put up or shut up.