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After flirting with new all-time highs, stocks reversed on the Fed seeing slowing labor market and planning no yield control for now. Volume is slowly returning, prices aren't making material headway, which is lending the stock market a tired look.

Just as I wrote yesterday before being yet again profitably taken out of the earlier long position, it's one thing to be building a base, and lacking the strength to break higher with resounding force.

That's exactly the case with stocks, and the absence of bulls' strong conviction. Each passing day that lacks clues hinting at their return, is leaving the S&P 500 progressively more exposed and vulnerable to broad weakness or even a takedown without much in terms of an advance warning. That's certainly the case with no hints at a new punch bowl on the nearest horizon.

Starting tomorrow, I'll be adding again to the length of Stock Trading Alerts as they return to the usual gold standard you're used to from me, but rest assured that behind the scenes, I am looking at the very same broad set of charts that power my trading decisions.

Thank you for your patience also today, and please find below a gift of broader corona perspective courtesy of Armstrong Economics. This is how the Covid-19 casedemic compares to the real and mortal challenges faced by mankind (as opposed to fear-driven self-inflicted wounds, which is what more than a few would say):

Back to finance - the key financial charts for today follow.

S&P 500 in the Short-Run

First, it's the daily chart perspective (charts courtesy of http://stockcharts.com ):

When prices just can't move in one direction, they become apt to turning the other way eventually. That's exactly what we have seen yesterday in the S&P 500, and the price action just in has the power to turn into more than a one-day event.

The Credit Markets' Point of View

Both leading credit market ratios - high yield corporate bonds to short-term Treasuries (HYG:SHY) and investment grade corporate bonds to longer-dated Treasuries (LQD:IEI) - wavered yesterday.

The individual moves in both corporate bonds ETFs (HYG and LQD) highlight the vulnerability to another leg lower after the preceding two-day stabilization.

I look for the cautious tone the Fed struck yesterday, to carry over to the regular session's trading just ahead - that's more likely to be the case than not. See for yourself on the below chart how the table is set.

Both stocks and the HYG:SHY ratio have been unable to push higher in tandem over so many recent days. Prices, that's just one dimension of the market moves - time elapsed, that's the other side of the coin. A meaningful correction that would scare the bulls, might be drawing near.

Summary

Summing up, the S&P 500 reversed from new all-time highs, and signs are that the latest weakness has some more to go. It's a precarious position stocks are in - even technology (XLK ETF) has seen a daily reversal candle on rising volume, and semiconductors (XSD ETF) led with steeply rising volume and prices reversing to the downside.

In short, the tech leadership is weakening, and once it sets in more visibly (as in taking the Russell 2000 along), the 500-strong index would be in for quite some trouble. The S&P 500 sectoral view (healthcare, financials, consumer discretionaries) confirms the cautious tone with subtly bearish overtones.

Last but not least, there is the dollar and my yesterday's question whether its break below the July and August lows was for real. Regardless of copper closing near its daily highs, I think we're in for a risk-off turn (or whiff, have your pick) in the markets.

Thank you for reading today's free analysis. If you would like to receive daily premium follow-ups, I encourage you to sign up for my Stock Trading Alerts to also benefit from the trading action described - the moment it happens. The full analysis includes more details about current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

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Available to premium subscribers only.

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Available to premium subscribers only.

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While still trading in a tight range, stock bulls are making steady progress on a daily basis. The slow grind higher just goes on, regardless of a daily weakening in the advance decline line or advance-decline volume, or the $VIX attempting to rise yesterday. The bulls better tread with a tight stop-loss regardless of the credit market signs, though.

The analyses in the coming few days will be briefer that you're used to from me, but rest assured that behind the scenes, I am looking at the very same broad set of charts that power my trading decisions. For business reasons related to your Stock Trading Alerts, I want to thank you for your patience before the number of charts presented comes roaring back later this week.

These are the two charts I picked as key for today.

S&P 500 in the Short-Run

First, it's the daily chart perspective (charts courtesy of http://stockcharts.com ):

The caption says it all - it's one thing to be building a base, and lacking the strength to break higher with resounding force. Judged by this chart alone, things could go both ways. Considering the many charts on my radar screen, a move higher is still the favored direction to go next.

The Credit Markets' Point of View

Both leading credit market ratios - high yield corporate bonds to short-term Treasuries (HYG:SHY) and investment grade corporate bonds to longer-dated Treasuries (LQD:IEI) - have again risen yesterday. So far, the turnaround has been relatively modest, yet it took a little pressure off the sizable relative extension in stocks vs. the HYG:SHY ratio.

When I look at long-term Treasuries (TLT ETF), odds are that corporate bonds have likewise stabilized in the short run. The corporate junk bonds to all corporate bonds (PHB:$DJCB) are also clinging near their Monday's highs, yet have run into headwinds yesterday. In short, the renewed upswing in corporate bonds is still relatively fragile, as also the JNK ETF chart illustrates.

Hence, the call to be still cautious, and cautiously bullish at the same time.

Summary

Summing up, the S&P 500 upswing still has higher odds of continuing than not, and the reasons go beyond the nascent turnaround in the credit markets. Smallcaps and emerging markets aren't painting a picture of caution (they're broadly in line with the S&P 500 short-term move), yet I am keeping a close eye on the dollar - is its break below the July and August lows for real? If not, we can look for a return of risk-off sentiment that wouldn't leave stocks unscathed.

But the key move yesterday happened in copper as it broke higher from its flag formation. That's a vote in favor of both the economic recovery and the stock upswing to continue, whatever its birthing troubles of the moment.

Thank you for reading today's free analysis. If you would like to receive daily premium follow-ups, I encourage you to sign up for my Stock Trading Alerts to also benefit from the trading action described - the moment it happens. The full analysis includes more details about current positions and levels to watch before deciding to open any new ones or where to close existing ones.

Thank you.

Monica Kingsley
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

• Read more