An tSionna {02.03.14}

All the happy talk from me about "things getting better" flies in the face of a market that has been acting punky since the turn of the year.  Again some quick bullet points on what I think is going on.

1.   It's become increasingly clear that the market's strong advance in December stole some of this year's return.  Note that we've fallen back into the trading range we traced from October till that break out in December.  If you folded the last two weeks-13/first two weeks-14 under the chart you would see a trend less sideways market.  If the year had ended on Friday we'd all be saying that an S&P 500 up in the mid-20% range was a pretty good year instead of worrying about what this all means in 2014.

2.  Markets are oversold short term but not by some of the longer term criteria we follow.  Probability would suggest we see some sort of bounce this week but probability also suggests that bounce has a greater likelihood of failing.  If I was to put money on the table I'd think we'd see a bounce starting mid-week or so that would take us to the upper band of resistance and then some sort of pullback from there.  That's just a guess.  Do not trade on that guess!  I have no idea what stocks will do in the short term!

3.  We have a road map to follow again.  We now know that stocks will not be able to mount a significant advance until that resistance is forced aside.  I think that might take some time.   

4.  Economic news overseas and some short term weather related statistics are just an excuse for the crowd to sell.  Nothing that is bothering stocks right now is unknown news.  It didn't matter back in December.  Now it does.  Sometimes stocks just need to go down to let off some steam.  There's support for S&P 500 around 1,750 and resistance around 1810 by our work.  

5.  Sometimes stocks correct by time, sometimes by price and sometimes by a little bit of both.  

6.  The folks who talk about January being a good barometer for the rest of the year will be having a field day this week as January was a down month in the 3-4% range.  All of that must be put in the context of what was in retrospect a frothy market and one that wasn't statistically cheap on a valuation basis.  Need more data and more time before we can declare 2014 lost.

Charts courtesy of FINVIZ.com.  Long ETFs related to the S& P 500 in client and personal accounts.