Monday Market Conditions 7/2/12 $SPX $SPY $VIX $VXX

U.S. manufacturing has decreased for the first time in 3 years, EU unemployment hits record highs, and the possibility of a double-dip recession is as high as ever.  Yet, today we close convincingly above 1360 for the first time since early May.  This is mostly due to the receipt of news out of Europe last week that a new plan had been agreed upon to allow rescue funds to recapitalize Spanish banks, as well as purchase Italian bonds.

Keep in mind, however, that this is not a fix and the underlying debt problem still exists, along with the rest of the worldwide fundamental problems.  But you can't fight the tape.  To that point, we continue putting in higher-highs and higher-lows from late May, with OBV showing increasing accumulation.  Could this just be climbing a wall of worry?  Take note of today's weak volume bar.

Volatility continues to fall closer and closer to that 16-level.  The time we breached that in March happened to coincide with a top in the S&P.  The biggest moves happen when everybody is on one side of the boat.

The NYMO put in a new high of the year again to start off the week.  We are dangerously overbought, and longs should consider taking some off here, but I wouldn't rush to load the shorts just yet, remember: the market can stay irrational longer than you can stay solvent.  Wait for confirmation.

64% of stocks above their 50-day smas represents the highest number since April.  Stocks are greatly overextended.  The recent move is just too far, too fast and needs to be digested.

Technology continues its descent.
Financials are really starting to wake back up.  This is a good thing.
Energy and Materials perked back up a little last week, but they still have a lot of work to do to to repair their charts.