The S&P 500 (SPX) has turned lower without pegging the old high at SPX 1687.18 first. Looking forward, the failure for the SPX to follow through with new highs as both the Nasdaq Composite (COMPQ) and the Russell 2000 (RUT) have done may be indicative of a sideways trading pattern that can last all Summer. Certainly the monthly DeMark sequentials are saying the markets need at least a cooling off period. The answer of whether the SPX can follow through a new high should come soon. For now, the market is reverting back as it should but as long as it holds the SPX ‘dark horse’ parameters, the bull rally stays intact. As if the bull-bear picture is not cloudy enough, the Dow is running into a confluence of its own. The daily chart has not ‘perfected’ the 9 count just yet but the weekly chart is in a 13 this week. Adding to the cloudy picture, the SPDR Financial Sector (XLF) is sporting a 13 on the weekly. A 13 has been recorded for the daily three days ago and a 9 two months ago for the monthly.
Given the importance of tomorrow’s Bernanke event, trading volatility should be on par with any Fed type event. I am still short term bearish and it won’t take me much to stay that way longer term but for now, I am going to give the ‘dark horse’ rally the benefit of the doubt. The preliminary plan is I will take a shot on the long side if the SPX should dip to the 1660 area and evaluate from there. Same goes if SPX sees 1680 first where I would consider switching back to bullish. Keep in mind Bernanke’s prepared opening comments will be released before the cash markets open. (updated intraday)