Market Leadership Important Here………………Update at 1:30 PM CDT
The most important things this month for the market was the realization that it was not going to fall off a cliff. With the rally over the last couple of days we are seeing a penetration of short-term resistance on the S&P 500 in the 1225 area and what looks like a push to more significant resistance in the 1275 area. This is what I would refer to as the “sugar coated rally” and I say this because the XLY discretionary ETF is holding its relative premium versus the XLF financial ETF. For the market to go into the “meat rally” you will need to see the XLF become the leader. In a sense the XLF has shown leadership qualities as it has gained significantly against commodity and precious metals ETF’s like the basic materials ETF, XLB, commodity ETF, DBC, and gold ETF, GLD. This is all good from a long term perspective, but a lot of work needs to be done before the “meat rally” breaks out.
Trading strategy at the moment: We remain short the gold ETF’s and are watching the stock ETF’s. We may trade short term within the parameters of a tight resistance formation of 1215 to 1275 on the S&P 500 with today’s highs at 1247 being a swing-point area for this tight range.
Nibbling at the short side for a trade. 10 percent short stocks for trader accounts, 5 percent short stocks for investor accounts. S&P at 1253.50.