Everyone knows our beloved five year rally seems to be weakening of late. The big question is just "how" weak will it become. If anyone tells you they know that answer, stop reading that website. Certainly more and more sectors are now exhibiting profit taking even as fund managers lounge sipping Mai Tai's from their catamarans off the coast. Indeed selling can beget more selling, however that doesn't mean we may not see a few days of buying to test overhead resistance and see if it holds; if the "top" is truly in.
Now is not a time (imo) to add to a long position.
Now is a time to be hedged or flat in a long portfolio.
Now is the time for day trades or brief swing trades.
Now is a time to let the charts show you direction.
A second enormous week of earnings lies before us. While thus far companies are largely beat (which should be the case if they're well run), forward guidance hasn't been all that impressive from a sales growth perspective.
Buybacks and dividend increases are helping buoy many names however this is a fools game which cannot go on indefinitely. Imagine where those names would be if they had not been buying back their shares?
Homebuilder (XHB) numbers were down again in July and retail (XRT), while it made a new high, rolled right over and gave up those gains. Numerous sectors are now below their 50d. Will the 100d or 200d pose as support? We shall have to see but even if they do, will we be able to take out overhead resistance? Many in the blogisphere seem skeptical.
The consumer may be getting tapped out here. That could translate into a point ahead where we will begin to see wages or hours worked per week in the U.S. increasing and if so, put further pressure on margins. Meanwhile things over the pond don't appear to be any better. Geopolitical tensions in Russia and Argentina's default certainly don't encourage risk either.
SPX is near it's 100d EMA (low) which has been prior support quite a bit the last few years. Will it be once again? Only time will tell.