Stocks Look Tired After Three Day Rally

The market was nicely higher in early trading, but has already given back those early gains and is now slightly in negative territory. Yesterday the SPX rallied back up to the 1195 level before losing momentum and closing at 1175.

This mornings burst of buying came on the heels of continued hope that plans in Europe are coming together and they will get the votes needed for their EFSF bailout fund.

In earnings news, both Accenture (ACN) and Jabil Circuit (JBL) reported stronger than expected earnings and their stocks are both higher.

Asian markets were mixed overnight, while Europe has been higher this morning. The dollar is roughly flat, while commodities are mostly lower. Oil prices are pulling back near the $83 level, while gold prices are also down so far to $1641.

The 10-year yield has climbed back above the 2.00% level, but just barely; and the VIX is 1.6% higher this morning to 38.35, and remains at elevated levels indicating traders continue to expect heightened volatility levels.

Trading comment: The trading range between SPX 1120-1220 has lasted for 8 weeks now and a resolution is likely to come soon. With heightened bearish sentiment among the indicators I track, I would not be surprised to see a breakout to the upside. But with the economy slowing and continued strains in the global credit market, I'm not sure how high such a breakout would even carry us. The flip side is that the market is highly news driven in this environment, and any negative developments out of Europe could push the market back to new lows in a hurry. As such, I continue to employ a balanced approach to the market as opposed to trying to get aggressive in either direction.

long SH