Last week was a good week for the market from a technical standpoint, with the S&P 500 moving ahead about 2% and pushing through two important layers of resistance.  It broke above its 200-day moving average, which had been providing stiff resistance for weeks, and also broke through even stronger resistance at the 1114 level.

The stock market is searching for direction, testing support and resistance levels each week. After threatening a waterfall decline last week, it instead found support and has rallied strongly. Today, the S&P 500 and Dow Jones Industrials joined the Nasdaq 100 and Russell 2000 by rising above the important 200-day moving average.

Since August 2009, with the exception of roughly nine weeks, the S&P 500 has stayed between strong support at 1040 and strong resistance at 1114, and it has been trapped in that range once again for the past month. Earlier today it was close again to testing resistance at 1114, but alas, it failed to break through and dropped back to 1089.

Here in Santa Barbara, where Sabrient is headquartered, "June Gloom" is that time of year when the marine layer and murky fog last until about noon every day before the sun finally burns its way through. The market seems to be enveloped in a similar gloom, and at this point we don't know when the sun might come out to chase it away.

We enter a new month this week mired in a persistent global malaise.  The weekend increase in Israeli-Palestinian tension doesn’t help, nor does the continued inability of BP to deal with the largest oil spill in history.  Economic news this morning was positive but without sufficient importance to do much more than soften the opening gap down.

Market volatility continues, with the Dow gapping down under 10,000 to start the day today before recovering nicely by the close. Most of the major indexes are still below their 200-day moving averages, but interestingly, the Nasdaq 100 (QQQQ) and the Russell 2000 (IWM) actually closed above theirs. I see this as bullish.

Unfortunately, the dismal attitude we conveyed last week, was fulfilled with one of the worst weeks the market has had in some time.  The S&P 500 has fallen almost 15% from its April highs and is now below all of its moving averages, including the 200-day moving average.