SPX breaks hrly gap support / 20MA

Friday, July 16th-7:00am

Menage a trois...

Recent macro/micro developments on the ‘soft patch vs. double dip’ off soft eco data and EPS season has switched focus from the many headwinds feeding the market previously, including this threesome…(Gov't Fin Reg, GS, BP) .   

If today’s late news flow was a few weeks ago, the market probably would have rallied some 300/400 points!.   Yes, market bounced, but it was mostly a concentrated move that was really no big deal, except for fast traders to have some late day fun!.   The news flow today is something that had to happen sooner than later,  it’s not a new catalyst likely for the very short in our view.   It’s mostly media drama for the masses,  unfortunately the scars left by Gov't/GS/BP on the public will take much more time to heal.  They won't be jumping into bed with them any time soon.

The only positive is it put some more “bull mud’  to cap the 1080 support level for dip buyers to move in. Unfortunately, we all know from BP how effective mud has been.    We’ve done this hit off support numerous times since hitting the 1098 April to June trendline that we put up as a resistance level here a few days ago.  This is the first "R" since the rally began that is not 'glass'.   Also, market is hanging over 20ma which is critical for more upside during EPS early stages,  but the range is getting tighter and something will give sooner than later, either the upside or downside.  

Problem arising with upside is if it’s not broken soon,  Bulls will give up for the time being (take profits) and allow 1080’s/20ma to falter.    Simply, even though we are the high end of recent range,  we are seeing fatigue set in after this 9% rally.  

Chart below on 'gap' hourly support: