Monday Morning Look at the S&P500

First of all I want to congratulate the NY Giants and more specifically Eli Manning. As an outsider living in New York City, I see how hard it is to be a quarterback here, especially the Giants (no one important cares about the Jets). This kid just keeps his mouth shut and wins. Good for him. Welcome to Canton Eli.

And now it's officially basketball season. And that means it's February, which isn't the best news for this bull market. Historically, February is one of the worst months of the year. Of the best 6-month period for the market (Nov-April), this is where the hiccup usually occurs. "The Worst House in a Great Neighborhood", as my friend Phil Pearlman puts it.

Last Friday we closed right at the the highs from last February of 1344. The S&P500 peaked right here last year before beginning its seasonal February decline. A breakout above these levels could take us somewhere in the neighborhood of 1360-1370, where we find the measured move of that inverse head & shoulders pattern and last year's May highs. These targets don't really help us much as everyone can see these levels and everyone seems to be talking about them. I don't like that.

The Relative Strength Index (RSI) also doesn't help us much. We do know that RSI is in bull mode and confirmed last week's higher highs in the S&P500 with higher highs in the oscillator. The problem is that we cannot rely on this indicator for anything new at this point. It's overbought, and it can stay overbought for a while. So we'll circle back to this indicator when it can help us further. Right now it does nothing for us.

I don't want to throw out the Fibonacci retracements to measure potential pullbacks here because I'm not convinced that we have see a top for this run. Once we get a key reversal and have a fixed top, we'll look for some re-entry points with retracements. But not yet.

I wish there was more to say and I wish the levels were more clear. I also wish that my Miami Dolphins had won the Super Bowl last night. But life doesn't always work out that way. Bottom line: I think it's tough here to trade the index itself. I've been saying for a while now that I think the individual names themselves are where we need to be. There are long set ups and shorts as well. Take advantage of these lower correlated markets while we have them. It may not last forever.

Tags: $SPY $ES_F $SPX