We have seen in the past that markets respond well when central banks lower interest rates or introduce quantitative easing. It seems to me that the institutional managers and big trading outfits want a QE3 in order for them to buy in, but conditions have not prompted Ben Bernanke to consider another round of QE.
With Europe still in bad shape and with no concrete plan to stimulate growth over there they market is expecting a continued stream of bad news. Even when there was aid announced to Spain the other day, the market barely reacted and eventually turned negative. So the affects of temporary good news from Europe wear off quickly and that is a sign of a nervous market.
I have a sign in my office that say "If you are waiting for a sign THIS IS IT" The chart below relates how much the bears are actually in control and what kind of bearish sign and situation the market is in. The lower tilt in the SPY is bearish and this week looks to be adding to the sentiment in the market.
The daily picture also shows that the market is weakening. With a drop below the bullish trend line today what that tells me is bullish uptrend is in jeopardy. If price action tomorrow is large and to the downside that should bring the bears out over the next couple of weeks.
The reports that come out tomorrow are Consumer and Core PPI, and the one that could shift the market a little is University of Michigan Consumer Sentiment. Europe is always in play so any yields that rise in Spain or Italy will be met with a bearish out look.
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