Where To From Here?

The indices finished with some mild gains, but it was a slow and boring day of action. After the gain yesterday, we were technically overbought and facing some substantial technical overhead around 1100 on the S&P 500. The bulls just couldn't manage to make it through that level, although they did a nice job of adding a few points to yesterday's gains.

What was particularly impressive about that action today was that the buyers were unfazed by strength in the dollar. Weakness in the dollar helped spark oil and commodities to lead the charge yesterday, but the reverse in the greenback today had little impact.

Unfortunately, the market is at an awkward juncture that makes it tough for traders to be aggressive. We have too much technical overhead and are too extended to be very bullish, but we are holding up well enough that it is difficult to be aggressive with shorts. Ideally, for the bulls, we will churn for another day or two and work off the overbought condition without a severe pullback. The bears are obviously hoping that the selling will pick up if we aren't able to make better upside progress.

Breadth was good again, but volume was light for the second day in a row, and that makes for less confidence in the upside, but one thing that doesn't seem to bother this market much is lighter volume. In fact, these days I sometimes want to embrace the illogical thought that light-volume rallies will end up going further than those on heavy volume.

We have a number of earnings reports of interest tonight, the most notable of which are AMAT, HPQ and PCLN. That should set the tone for tomorrow at the start tomorrow but further upside is going to take some effort from the bulls to overcome the technical obstacles.....