It seems as if change is in the air and no, it’s not the crisp air of late October, it’s the market.

Once again, after opening higher, the S&P 500 reversed sharply today once the Dollar started to show strength against the Euro. The widely followed index closed the day lower by -1.17% to 1066 right near the low of the day at 1065 and well off the high of the day at 1091.

Today on the Buzz and Banter, Professor Steve Smith talked about the market's change in character.

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“Generally speaking good news no longer seems to have the legs and dip buyers are not coming in as early in as strong as they had previously. This can be seen in the response to positive earnings reports such as Intel (INTC), which is now some 8% below the spike immediately following its report, or the fact when a Google (GOOG) or Amazon (AMZN) deliver blow-out numbers they cannot spark a broader rally and were lone shoots of green in seas of red on the days they reported. Similarly, the positive economic data, such as improved housing, is failing to spark much a sustained bid.

“The waning enthusiasm is evident by six days over the past two weeks in which the market sold off and closed near session lows. This a break in the pattern from the first half of October that had seen a steady step ladder as the market rose from the 1040 level that usually left bears staggering with late day bursts of buying. Now we have a jagged pattern that is not necessarily healthy consolidation.

“Typically when price starts to have large oscillations it portends a change in trend. Similar patterns were seen in the middle of September just below the 1080 level, which was resistance at that point, and in early June below the 960, also resistance at the time. Each was followed by corrections of 5% and 8% respectively. Will the market once again need to retreat before it can mount a successful charge through the 1110-1120 resistance level? Another more definitive close below 1080 would certainly increase the likelihood of pullback. Today’s reversal is starting to stack the odds of a retest to the 1040 level.”

He wasn’t the only one to notice the change; Professor Mark Eckelberry noted it on today’s Buzz.
 

“I warned on Thursday that if oil lost the 79.60 level bulls could get in trouble. It briefly held overnight, but after this morning’s trap, we made a lower low as the Euro failed to hold 1.50. ES (SPX futures) finally closes the 10/13 gap at 1068.75, which is now acting as resistance, a very bearish development. Be careful here, as the markets have conditioned traders to buy dips at every turn, a mechanism that enables clearing inventory with relative ease (which is precisely what is happening right now). Bulls need ES to close above 1069.”

Professors Smith and Eckelberry bring up excellent points, especially about earnings reports which is something I noted last week. But the market could be coming in for other reasons. First there's a rumor that Bank of America (BAC) may need to raise money. Also, Brazil has been aggressively buying dollars which could be to blame for today’s dollar strength.  

All is not lost for the bulls, this is a busy week with lots of trading catalysts and earnings season in full gear. GDP is reported on Thursday and Bond auctions all week will keep traders busy.

Have a great night!