Taking another look at our market and sector trading envelopes, we see that the S&P 500 has encountered some overhead resistance at the 200-day moving average. In addition, the market is overbought and the dollar is weaker after short-term strength (see below). The next several days will likely see cautious trading (sideways to negative prices) as investors still seem uncertain about the future.

Reasons to be cautious:

• Financial company EPS estimates beginning another round of downward revisions.
• As shown below, the dollar is at the top of its down-trend.
• The S&P 500 and DJIA are overbought.
• Leading sectors (tech & energy) are more overbought.

click to enlarge

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