S&P Closes (slightly) Up - but Yen Says, Fear is Here

The S&P started the week with a strong move up, closing above its 50 day MA for the first time in over a month. Tuesday morning saw a strong opening for stocks but weakness emerged toward the closing. As we mentioned in the weekly review on Saturday, yen strength is a red flag. Hopefully, the S&P will move higher and the red flag will turn out to be nothing more than a red herring but for now we must to stay vigilant The yen's strength today was evident not only against the battered euro and British pound but also against the strong USD, the loonie, and the Aussie dollar.

It's too early to say if the relatively strong yen is meaningful but we have to remember that in the past, it's been a bad omen for the markets. You might recall the days preceding the Dubai debt crisis in late Nov. 2009. In the days BEFORE Dubai hit the headlines, the yen soared with no apparent reason. Perhaps traders are betting on a weak ADP report on Wednesday morning. That would not be a complete surprise as recent news suggests. Or perhaps, more bad news from the EU or the UK is bubbling to the surface. And then again, it could be just a temporary state of nervousness as the S&P approaches a major resistance. Whatever the case maybe, we must not ignore the sign. Keep you stops tight!