Just When You Thought It Was Safe To Buy Equities...

Last night’s rally on bullish follow-through momentum from Friday, ran out of buyers early Monday morning as the ES ran up against it’s 200 DEMA and RTH - R2. Once again, headlines out of Europe was the catalyst for another global equities sell-off, as the ES took it on the chin for 38 points (H-L) with the small caps (TF) and European indices (FESX,FDAX) leading the way down.

Liquidity was adaequate which resulted in an orderly trend-day-down which never reached waterfall status. No doubt weak longs were the target of the sell-off, which resulted in an only 9% day on the NYSE and a 17% day on the NASDAQ, with declining shares leading advancing shares 5-1 on both exchanges. Nevertheless, there were 30 new highs combined on the 2 exchanges, but also 29 new lows.

Market internals and price action still suggests that the bulls are in control, as the bulls continue to support the market on bad news, and rally the market on good news. Ranges have contracted, and liquidity is not being pulled as often as it had been, along with the recent improvement in market breadth and leadership.

While all the indicators are not bullish, the major indices are still above their 50EMAs and the VIX is still below its 50EMA, but they must quickly consolidate at current levels (1190.00), and assert their strength once again, (accept above 1220.00) if they are going to resume the uptrend and fulfill their upside potential.

Still, in the near and intermediate term, the market remains vulnerable to headline risk out of the Euro-zone, along with negative economic news at home. An $SPX close below 1170 and a $VIX close above 34 would consequently, alter my somewhat bullish view.