Fed Walks Fine Line Between the Short-Term & Long-Term

by David Brown, Chief Market Strategist, Sabrient Systems

Big Earnings Week Starts Off Slowly

by David Brown, Chief Market Strategist, Sabrient Systems

Nervous Market Begins New Quarter

by David Brown, Chief Market Strategist, Sabrient Systems

Seeking a New Catalyst

by David Brown, Chief Market Strategist, Sabrient Systems

The market sputtered into negative territory today (Monday), with the S&P 500 closing at 1142 (-0.57%). Still, the index is well above the 50-day and 200-day moving averages.

The market is off to a great start this week, powered by last week's momentum and further buoyed by a lessening of fears about Europe's sovereign debt. All the major indices are above their 50-day and 200-day moving averages, with the S&P 500 finally breaking out of the 1120 resistance level, closing today at 1141, a new 4-month high. As an interesting historical aside, the 1120 resistance level was first encountered way back in April 1998.

The ragged summer of 2010 is history, thank you very much, but despite an improved outlook for the economy, September drifted forward on very low trading volume last week, probably due to the holiday-shortened week (Labor Day on Monday and Rosh Hashanah on Thursday and Friday). The few economic reports we saw last week were positive, including slightly improved initial jobless claims, and the outlook improved for European banks.

The low-volume “dog days of summer” have been anything but uneventful. Rather than a sleeping dog, this summer has been more like a rabid dog—gyrating wildly and scaring the heck out of everyone in its path.

Nothing seems to be strong enough to lift the market out of its doldrums.  Not the shiny corporate earnings announcements from Wal-Mart (WMT) and Home Depot (HD).  Not the exciting merger talks between BHP Billiton (BHP) & Potash (POT) or between Intel (INTC) & McAfee (MFE). Not the slightly improved global economic picture.

As we wind down the summer doldrums, are we heading toward another low-volume August?  Today was one of the lowest volume sessions of the year on the NYSE. Kids are returning to school in some parts of the country already, and many portfolio managers and traders will begin returning to their desks. But what they are finding in the market this week is quite different than they would have seen last week.

The market continues to creep upward, with the short-term trend clearly positive albeit on quite low volume.  The S&P 500 remains above its 50-day and 200-day moving average, but as we head into the current week, our concern is about conviction within the marketplace.  The ECRI (Economic Cycle Research Institute) finally gave a positive uptick last week, but it would be early to conclude that we’re on a strong uptrend.