As anticipated in yesterday’s commentary, the S&P 500 (SPX) encountered some selling pressure but it was insufficient to break the intraday range outside that seen last Friday and to that extent an inside day was registered on the cash index.

There remain two key hurdles which are illustrated on the chart - the January 6 intraday high around 945 and the 200-day EMA which currently sits just four points above that at 949.

We should expect a challenge of these levels, but the onus will be on the bulls to carry this rally forward where the momentum indicators are suggesting that a corrective phase is the path of least resistance.

The following story caught my eye and will also act as a restraining factor on some of the newly converted bulls to the banking sector.

Banks are overvalued and the government enabled them to have better first quarter earnings than they should, well-known analyst Meredith Whitney told CNBC.

"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."

Whitney, a former analyst at Oppenheimer who has her own firm, is renowned for calling out the problems with banks’ toxic assets before the issue became widespread.

"This is the great government momentum trade," Whitney said, on why bank stocks had seen some improvement lately. "But the underlying core, earnings power of these banks is negligible."

Whitney also said that consumer spending is still going to remain slow. "There’s a massive retraction in consumer liquidity," said Whitney. "Credit contraction is happening at an accelerated pace. Consumer spending is going to be less than people expect going forward."



The Russell 2000 (RUT) faces twin hurdles at the 200-day EMA and also the January 6 high which are both found in the neighborhood of 510-515.



The FTSE in the UK is also stalling at the 200-day EMA level.

US readers may be missing out on some rather egregious home-grown sleaze which is currently providing a lot of easy pickings for journalists who are anxious to portray the British parliament in the worst possible light. Just one anecdote will provide the flavor. Members of Parliament have been revealed, via leaks in the Daily Telegraph , as engaging in all kinds of distasteful (and probably in some cases illegal) abuses of claiming for re-imbursement of expenses for supposedly performing their parliamentary duties at the taxpayer’s expense.

One MP claimed about $3000 for work undertaken to fix his moat and another claimed a similar amount to have fake Tudor beams installed at his residence.

I suppose we shouldn’t be surprised that politicians have been “gaming” the system just like, in their own fashion, the bankers played fast and loose with other people’s money.

Under the Blair/Brown er the tacit assumption, which has been made by the Westminster/City axis, is - Only little people play by the rules.

I am reminded of Leona Helmsley who was widely reported to have said that only little people pay taxes.

She ended up in jail for tax evasion.

I would bet the entire net worth of the UK government that no politicians or bankers will end up in jail for their ongoing “indiscretions” although clearly many should.



BIK, an exchange traded fund which tracks the BRIC emerging market sector, has a pattern involving two shooting star patterns and a spinning top candlestick which are suggesting that the fund has still not broken away from the 200-day EMA.



JDSU may try another push back towards $5.40, but there is a clear risk that a violation of the dotted trend-line could be headed back towards $4.20.



Citrix Systems (CTXS) could be poised to move higher from the bullish pullback channel formation.



Broadcom (BRCM) has pulled back to a fairly critical area where the trendline should be expected to provide some support and the 200-day EMA is not far below. I would keep this on the Watch List today for an intraday trade once the direction (probably up) becomes clearer.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.