The Chart below plots the hourly price structure of the S&P500 ETF "SPY". On Thursday, the market gaped to the upside after better than expected economic numbers but faces now resistance at the gap resistance of USD 111.5. Traders have to be aware that this recent rebound has been accompanied by very low volume and there is still no evidence that investors are heavily buying into equities. In addition, there is still a negative Momentum divergence in place, showed by the red lines.
This Friday, Credit-Suisse is writing in their morning report, that there is still a lot of cash on the sidelines and they see Fund Manager sitting on 30 % cash levels. This may be true, but the question is what the money will be used for. It looks as if Equity Funds are getting hit with waves of redemptions. The chances are high that this cash will not flow into equities in the short run. Also, the high level of bearishness has been reduced and bullish sentiment is on the rise. A further rise in bullish sentiment this week coupled with a low volume rally could be an indication that this move to the upside has no legs.
