The market flopped around all morning and the S&P 500 managed to trade below its 50-day simple moving average for the first time since the beginning of September, but we held where we needed to and managed a decent spike back up in the last two hours of trading. It looked like the bears decided to cover some shorts when they were unable to keep the market below the breakdown level and some dip buyers added to the upside as well.
The recovery from the lows was a good sign, but there was still plenty of red, breadth was poor and we are still smack dab in the middle of a trading range. Volume was quite light, but the strength in oil, banks and some of the commodity names (when the dollar was strong) was a positive.
When we are in a trading-range market like this one, the best move is to focus on trading it (and not worry too much about being bullish or bearish). The range will eventually resolve itself, and that's when we'll be able to focus more on catching a trend, but at the moment, we are chopping around and changing direction quite quickly.
It is very easy to come up with scenarios and theories for which way we will eventually break, but there is no real edge to be found. Europe is keeping downside pressure on things while some better economic numbers are helping the bulls to hold us up. What matters most one day is forgotten the next, and that has resulted in some very choppy action.
We have some economic news tomorrow to deal with, but be ready for the market to continue its trading range action.