A lack of negative news was all we needed to tack on decent gains following yesterday's strong finish. Volume was light and a bit choppy but the bulls were hungry for action and managed to push things along nicely after the early morning bounce was sold.
While two days of decent gains are a nice change after last week's rough action, it doesn’t do anything to change the big picture. We have been in a trading range with 1120-1125 of the S&P 500 as the floor since Aug. 8. Despite one low-volume, window-dressing run in late August, we have not been able to turn the trend back up.
My major concern is that if we test that support at 1120-1125 again, I do not think it will hold and we’ll see another ugly leg down. Unfortunately, with the negative news flow out of Europe, we have a potential catalyst in place for that retest.
The European situation is a big unknown, and it can remain uncertain for quite some time.