an tSionna {04.29.15}

Chart of the S&P 500 ETF SPY.  {Chart is from FINVIZ.com.}  The S&P 500 made new highs in the past several trading sessions but sold off Monday and made a lower low yesterday.  Right now it is at trading right up against resistance.  It is also overbought by our work across multiple time frames.  I have no predictive power about where the index might go in the short term.  For all I know it may power to new highs.  However, probability suggests that a confluence of factors could challenge the S&P at least over the next few trading sessions.  

First the market will be attuned to any change in language issuing later today from the Federal Reserve regarding interest rates.  News that the Fed's will begin tightening interest rates sooner than expected or that economic growth is weaker than investors have been assuming could put pressure on stocks.  On the other hand an all clear from the Fed, that is a signal that nothing is going to happen for awhile might push stocks over the top again to new highs.

Further negative news out of Baltimore or more strange going's on in the mid-east.  Yesterday, the Iranians diverted a Marshall Islands flagged ship to one of their ports, briefly causing stocks to tumble when it was erroneously reported that they had diverted a US flagged vessel with US sailors on board.  Markets don't like these sorts of things.

Continued negative earnings news.  Yesterday gave us several high profile companies with disappointing earnings results.

Or again the fact that the market is now overbought by our work, with the S&P 500 up a bit over 3% this month after yesterday.  Again also trading at resistance, a level it's been turned away from several times in the past few months.

Please note that I'm not saying that stocks can't go higher or that they just won't churn around here for a bit.  Probability, however,  suggests that when looking on a historical basis it may not be on a straight line north.

*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time.

PS.  If you want the positive interpretation of this chart, a lot of folks who follow money flows would argue that each time the market tests resistance and is repulsed, in the absence of news, makes it more likely for a move through these old barriers to higher prices.  I think there's some credence to that argument but I wouldn't be surprised if it doesn't occur right now.

I have been very quiet in client accounts recently.  More on that at another time.