Momentum cooled off this week and the bulls wrestled with technical resistance at 1150 on the S&P 500, but the losses were fairly mild and the technical picture remains positive. We had a classic failed breakout on Tuesday when we reversed sharply intraday, but the bears have not been able to pressure us lower.
Probably the most negative thing about the action is that a number of the recent leaders such as NFLX, BIDU, AMZN, CRM and PCLN were struggling, but breadth was better than 2-to-1 positive on the NYSE and oil and financials helped to offset weakness. It is never a good sign when leadership stocks struggle but, so far, it isn't spreading too much into the broader market.
While there are enough negatives to suggest greater caution, there is still a good number of dip buyers in the market that are preventing any downside momentum from building. There was some talk this morning from the head of the New York Fed that was supportive of another round of quantitative easing. As long as that possibility is in the air, it is going to be hard for the bears to really press.
Once we are past the first couple days of the new quarter, we have a lull while we await earnings reports. We'll have some economic data to consider but the focus is going to start shifting to earnings very quickly. Ever since this recession began, we have had some surprisingly good reports, so I'm sure the bulls will be optimistic about a continuation of that theme.
It was a flat week of action, but that means our next move is likely to be a strong one as traders try to catch the next move. The bulls still have the edge, but they lost some energy this week and are looking a little vulnerable.
long PCLN; NFLX
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