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On May 10, the SP made new lows for the year. Since then, the index has gained little ground and shown a lack of direction. From this, we've often asked the question: Is this a churning or a basing? There's no textbook answer to this question but the behavior over the last five days suggests more of a churn than a base.

Generally, healthy markets open weaker and close stronger. I touched on this in the buzz yesterday but let's look at the last five days. The SP futures opened higher five consecutive days - and by no small margin. The cumulative gain over the five day period was more than 25 points. However, the closing gain over the same period was just 11 points (an intraday loss of about 14 points). Until we see the market open weak and close strong (rather than the reverse), I'm going to score the current behavior under the 'churn' category.

With that in mind, today's lower open potentially sets the stage for a move outside the recent range. The lower open was likely 'necessary' since we've managed to go nowhere after five higher opens. If Hoofy is in control, he'll recover from early weakness and post a close near the day's highs.

However, the recent pattern of gains around expiration suggests that today is Boo's day. I stipulated the day was Tuesday after option expiration and the SP futures had scored three higher closes. The next day's results were bearish. There were 39 occurrences and the day's close was lower in 74.36% of them. Remember Minyans, past performance does not indicate future results. But that's a pretty decent sample size with a high percentage of lower closes.

Observing market behavior is critical to success in trading. Today's lower open is clearly a change in recent behavior. From that, let's hope today's close offers some clues to future direction.

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