The New York market continues to back and fill and seems to be impervious to the problems in the Euro zone. Political uncertainty in both Spain and Italy have lead to significant setbacks in most European markets this week ranging anywhere from 4%-7%.
We don’t believe the New York market will move much higher here with the sequester due to come into effect the 1st of March. The Obama Administration now appears to want to delay any spending cuts and are talking up the idea of more tax increases. We can’t imagine this formula to be very supportive for the market and we will no doubt have a clearer picture of upcoming policy initiatives when Obama delivers his State of the Union address on Tuesday, February 12.
We should soon begin to get some numbers regarding the state of the consumer from retail sales, the housing market and the automobile business. In the meantime, this is a great trading market so continue to do your scans everyday and smoke out some of the great trading opportunities that exist in this market.
On a technical standpoint the S&P has been making higher highs a long with lower lows as it consolidates in a broadening sideways pennant. However notably the Twiggs Money flow has started to diverge. This shows that while prices are holding, there is a distribution out of the index. Early Warning sign!!