Overbought Pullback Off The 60's

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The sixty-minute charts got very overbought once the market went green today after the bell rang with a slight move lower. We rallied right away, and saw RSI's reach as high as 77 on the Nasdaq and 75 on the S&P 500. We all know that these levels are basically unsustainable over time. It didn't take long to see the market start to sell, and although it doesn't feel great when it's happening, you have to be happy on some level since it's healthier for the bulls to get things unwound. It's extremely hard, although not impossible, to get much higher prices once RSI's get over 70, especially with readings as high as we saw today. So now those short-term RSI's on the key index charts are down into the 50's.

Although it can get lower, it's at a level where we should see some attempted upside action shortly. There is strong support another 50 cents lower on the SPY, thus, I think we'll make another move back up in the near-term, although, of course, there are no guarantees on that prediction since we all know we're still dealing with very bad weekly and monthly charts. The market never feels strong when it starts lower, moves higher, but then blasts back down as the day moves along, basically closing on the lows. There was absolutely nothing bearish with today's action. Just normal unwinding with the oscillators behaving just fine. Let's see if the bulls can get things going with the S&P 500 moving no more than five points, or so, lower.

There will be lots of earnings reports to be seen by everyone in the next few days as the market's true leader, the world of the financial stocks, start reporting one by one. Wells Fargo tomorrow morning gets things under way with these stocks having held up pretty well overall. The market is expecting good things from them. If they don't deliver, it will be far difficult for the market, especially the S&P 500 and Dow, which is where these stocks live. Maybe the Nasdaq will become the index of choice if the market wants to find a way to hold up.

But let's be real here, these stocks need to come through at least decently, if the bulls want to ultimately make a true run at the old high on the S&P 500 up at 2119. There will not be any new highs if the bank stocks don't participate well on the upside of the ledger. A lot of Nasdaq stocks, and even small cap stocks, individually have fallen pretty hard ahead of their reports as most don't expect the best from these parts of the market, but the banks have behaved differently. They have, for the most part, held up, thus, they need to prove they're worthy of their prices. Things get rocking from here with regards to earnings.

If we look out deeper, and focus only on the big picture, then we're still just meandering around the wide open range of 2045 up to 2119 on the S&P 500. While the market has behaved better of late, it still hasn't done anything relevant. It must clear 2119 with force, or lose 2065 with force, thus, my 2045 number to get this market heading more directionally. It's all just a big trading range no matter how it feels from day to day based on your bias. Weakness can be bought for now as the technical picture isn't bad on the daily chart. Just recognize the risk that will exist every day thanks to poor weekly and monthly charts. We play the wide and loose range with guarded caution for now.