TGIF: Trading Expected To Be Light Ahead of Holiday Weekend

The market help up very nicely yesterday, and even built on its gains right into the close. Regardless, it has been a very rough month for the stock market, and traders are likely happy to shut it down early today and get a start on the long holiday weekend.

There were no big headlines this morning out of Europe, which is nice. There were some economic releases here in the States. To wit, personal income rose +0.4% (in-line), while personal spending was flat, coming in below estimates. The savings rate jumped from 3.1% to 3.6%, as it appears consumers reigned in their spending.

While this is good for those individuals, who may be repairing their personal balance sheets, it doesn't help the economic rebound, which seems to be losing speed of late. The ECRI weekly index has been hinting at this slowdown for a while, and it looks like it is materializing now.

Asian markets rose nicely overnight, and Europe is positive this morning; the 10-year yield is flattish around 3.33%; and the VIX is below the 30 level for a second day.

Trading comment: Yesterday was a nice rally, and we used the strength to do a little selling. At this point, while the market could continue to bounce, it looks like the leadership in the market is narrowing. So my strategy will be to focus on those stocks that continue to lead the market, and pare back those positions that look like they are beginning to struggle.

The S&P 500 is sitting right below its 200-day moving average (see below), which as I have said should act as resistance on the first push higher. I would expect the market to pullback a bit from here, but then to successfully push through resistance. That is the bullish scenario for an oversold market coupled with highly bearish sentiment.

But if this market truly is not ready to rally, we will know it by the inability to recapture this key moving average. In the meantime, enjoy the long weekend--