What will be the catalyst?
The market found support at the September lows and now it is finding resistance at the previous high. This could lead to a trading range between the tow or we will define a catalyst to break through either end. Most investors and analyst are talking about a test of the lows as the markets are overbought short term. The run off the March lows is where everyone points with a better than 50% move by most indexes. Many make valid points and they may be right eventually, but for now the momentum is on the side of the bulls. The break higher seems to be have the vote near term with the S&P threatening to break through the resistance zone of 1100-1120. What is the catalyst in place and is it sustainable?
Scanning across the sectors of the index we find six of the ten major sectors breaking higher. The remaining four have one uptrend and three sideways trading ranges. Reviewing the six sector on the breakout moves basic materials, industrials and healthcare look the strongest. Technology, consumer services and consumer durables are moving, but lack some conviction. The big question is can they carry the broad markets higher and through resistance. From my view it is all on the shoulders of sentiment. We don’t have any big news ahead and the economic data is likely to be in line with estimates. The retail sales data this morning was ‘driven’ by the auto sales. Still not the kind of numbers to drive the markets higher.
The areas to watch are Jobs, retail sales, crude oil, home sales and auto sales. If jobs pick up and the consumer returns that will be the likely catalyst in the short term for the markets. It will take time and patience for this to play out. Unfortunately most investors are running short on patience as seen in the intraday volatility picking up. Stay focused on your goals for your money. Let the market work out the challenges and protect your money.
