So the big question now is whether the markets are consolidating and setting up for another move higher, or are preparing to roll over from the lack of broad-based leadership. As energy and commodities power higher, the financials continue to act as a major drag – consider the chart at right comparing the S&P500 ETF (white line) with the Dow Jones Industrials ETF (blue line). The Dow has clearly outperformed recently, and without some relief in the financial sector, it’s hard to see how the S&P500 will be able to push through any resistance at the 1400 level.
We may be getting some weak sell signals from a couple indicators, but nothing very persuasive, and if anything, a slow churn upward seems likely from here. Volume continues to be lackluster. Sorry this is so noncommittal – we’d like to espouse some grand market prediction, honest, but there’s just not much reason to be an enthusiast in either direction right now: the long term trend is bearish, but it also seems likely that this bear market rally isn’t finished yet. Indecision is often a great reason to sell premium.
Volatility continues to underwhelm, although it’s worth noting that the implied volatility in the major indexes is now crossing above the historical volatility levels for the first time since mid-March.
IWM – Russell 2000 – 8.88
XLE – Energy – 99.42 – nibbling on more negative deltas here
XLV – Health Care – 8.72
IYR – Real Estate – 9.70
DBC – Commodities – 97.51
EWW – Mexico – 96.27