Coolhand's Market Analysis

The morning session started out a bit volatile and the broader market did see some selling pressure in the first hour of trade, but after selling off almost 1% the market turned around and chopped its way higher for most of the rest of the day. A late afternoon pick-up in buying pressure put the S&P 500 up almost 2.5% at its high of the day, but the closing minutes of trading saw some hard selling pressure after that major average touched resistance. By the close, the S&P 500 gave up more than 1% of its gains, but held on to significant gains nonetheless for the third day in a row.

Today's gains are consistent with how this market has been trading since early August. The major averages reached the upper end of its current trading range and that's when the selling pressure kicked in. The question is, are we headed back down again, especially given the price rejection at today's highs of the day.

While the media may be trying to put a positive spin swirling around potential bond purchases by China and other BRIC nations, the situation remains tenuous. And there was news today that Credit Agricole and Societe Generale, two of France's leading financial institutions, had their ratings downgraded by analysts at Moody's, which was a rumor that was circulated earlier this week. But momentum is a powerful thing when it gets going, and once again this market is tacking on big gains very short time frames. But the same holds true for the downside. While the bears are surprised by upward strength when it occurs, the bulls are equally surprised at the downside strength. But so far it is contained a trading range and as I mentioned yesterday, what's working is buying support and selling resistance. And resistance got sold today.

The dollar fell 0.3% against a basket of competing currencies, while the euro rose by 0.5%.

On the economic data front, August retail sales were flat, which was below estimates of an increase of 0.2%. Not surprisingly, last months retail sales report was revised downward by 0.3%. That seems to be typical for many of our economic reports. Most seem to be revised downward after their initial release.

Also released today was the Producer Price Index for August, which was flat. That was in-line with estimates. Core prices were up 0.1%, which was near estimates calling for a 0.2% increase.

Here's today's charts:



NAMO and NYMO remained in buy conditions



NAHL and NYHL also remain in buy conditions, but didn't move very much.



TRIN spiked lower and is now moderately overbought, while TRINQ remained relatively flat and modestly bullish.



BPCOMPQ turned back up, but remains on a sell.

So the charts look bullish at face value, but today's late day sell-off may be the beginning of another leg down. But something tells me it won't be that simple this time. Especially since OPEX is Friday. That muddies the waters a bit. Still, I have to assume this remains a bear market and the fact that resistance held keeps me cautious and on the sidelines.

It will be interesting to see how sentiment shapes up for the coming week. We get overly bearish at the bottom of the channel and bullish levels rise towards the top. But our survey has remains in the market.

While I remain in the F fund, I am not overly bearish here. The downside appears limited right now, although that can potentially be several points below current levels. And there are some pockets of the market that are doing very well, such as SOX.So I suppose I'm neutral right now, but September is only half over and once OPEX is behind us things could change. Whether that change is bullish or bearish remains to be seen. We'll see how sentiment shapes up later this week as that could give us a clue.