Sideways Action Boots S&P 500 Below 50 Day Moving Average

Major markets continued their sideways action today, and like a coiled snake, everyday this goes on, more and more energy is being stored for the eventual strike.

Whether the cobra bites the bulls or bears is, of course, an unknown; however, Wall Street Sector Selector remains positioned for lower prices ahead.

Today the S&P 500 (NYSE:SPY) closed just fractionally below its 50 Day Moving Average, the widely watched indicator that tends to be the demarcation line between bull and bear markets for short to medium term traders.

The day’s big news came from J.P. Morgan (NYSE:JPM) which reported a 60+% jump in profits and a write down of $1.1 Billion for penalties related to “foreclosure gate.”  Fourteen large institutions, including J.P. Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) appear to be involved and so it will be interesting to see how all of this unfolds and what kinds of penalties might or might not be eventually imposed. Don’t expect Bank of America (NYSE:BAC) or Citigroup (NYSE:C) to get off the hook either.

President Obama outlined his deficit reduction plans which include Medicare and tax reform, and immediately Speaker of the House John Boehner and other prominent Republicans attacked the plan, saying any tax increases were a “non-starter.”

This certainly sets up an interesting drama, shall we call it the ultimate game of chicken (?) that will play out in front of the rapidly approaching deadline for expanding the federal debt limit which is forecast to be breached sometime in mid-May.

Oil recouped some losses, up 1.1% today, and energy experts forecast summer gas prices to be north of $3.80 which will surely act as a headwind to summer travel plans and consumer spending.

Retail sales came in today at a lower than expected gain of 0.4% for March and I think it’s safe to say that number will decline even further as the bite of high gas and energy prices starts to take hold.

The Fed Beige Book reported “moderate” expansion but already 7 of 12 districts are reporting sales and production problems related to the earthquake and tsunami in Japan.  I believe that this is just the beginning of these kinds of problems for both the Japanese and United States economies.

On Monday I sent an article related to ETFs for a Troubled Japan (NYSE:EWJ) and will resend that tomorrow morning as many people did not receive it.  If this is a duplicate for you, I apologize, however, with ongoing developments there, it’s important to consider these actionable possibilities as well as know our plans related to this volatile sector.

Disclosure: No positions in ETFs or stocks discussed in this article.

John Nyaradi is the author of Super Sectors: How To Outsmart the Markets Using Sector Rotation and ETFs.

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