In a market where technicals dominate, 13 points is going to make a lot of difference.  Near term on the S&P 500 and individual charts we are overbought, especially in many of the winners in individual equities who are nowhere near the 20 day moving average.  They need some consolidation.

Yesterday, the market indeed did hold S&P 1113 - one of the key levels.  A pullback below that level is not fatal, indeed a bit more of a severe pullback would be better to allow people to jump back into long positions at lower prices, as individual charts would consolidate.  But the key rub here is we cannot get too much of a pullback.  Everything revolves around S&P 1100... a pullback to that level would be a buying opportunity but a drop through it would cause some large concerns. 

Hence a game plan of (a) buy a dip into S&P 1100, but (b) cut bait if 1100 is penetrated ... is my current view.  That is completely technical and has nothing to do with what is happening in the real world.

Key levels remain

S&P 1130

S&P 1113

S&P 1100

The bear case is quite simple - this is no different than June; we broke through a key resistance (back then it was the 50 day moving average) wiping out the shorts in yet another V shaped, low volume rally - only to immediately reverse and swan dive.   Yesterday we broke through a key resistance (this time the 200 day simple moving average)... and we'll see how it plays out from there.

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Outside of technicals, we have a huge dichotomy that is building between domestic multinational earning reports/Asian economic data versus domestic economic data. 

I almost keeled over laughing at the headlines on Monday's new housing report - it was better than expected but the 2nd worst reading for June in history.  Yet I read about the market rallying on a surge in new home sales.  Uhhh... folks, real estate is seasonal - June is supposed be the 1st or 2nd best month of the year in terms of sales.  Then yesterday Case Shiller prices showed a rebound; the pundits clap in glee.  They forget to mention that the bounce in housing prices takes us all the way back to mid 2003 levels in housing.  And that's with 4.6% thirty year mortgages.   Imagine pricing at a more normal 6% mortgage.  And in a few months we head back to seasonally weak time of the year for real estate.

But the more important reports lie ahead... Friday is Q2 GDP which at this point is backwards looking and not that useful, plus it is revised 10x to Sunday so you can expect whatever they say Friday to be revised down twice in the coming quarter after everyone acts like a lemming to it the first time around.  More important is unemployment and the ISM reports (manufacturing and services).  Ironically, corporate profits would be hurt if American companies dared go on a hiring spree because revenue growth (ex-Asia, Latin America) is just not there in many industries.  Hence the dichotomy.  In terms of earnings, we are passing the 'masters of the universe' stage this week, and now move to companies that are reliant on America rather than are global entities.  The main saving grace here are some of those sectors (such as retail) might have expectations brought down so low, they can be beat.  But it's a crap shoot as seen by Panera Bread (PNRA) vs Buffalo Wild Wings (BWLD) last night.

Round and round we go... where we stop nobody knows.  All this analysis, knee jerk reaction, greed, fear and the S&P 500 is flat for the year.