There was something rather odd about explanations given for yesterday’s rally, and perhaps the oddest was the massive rally on the Mumbai Exchange which I discussed in yesterday’s column. The result of the Indian election was not that much of a surprise and it strikes me that some commentators were stretching a lot in claiming that the euphoric reaction on the Indian stock exchange could act as such a powerful motivator to lift all other global markets.

Rather, I think we saw an absence of sellers yesterday as the bears, I believe, are awaiting the bounce back towards the clear overhead resistance on the S&P 500 at the highs from two weeks and also the 200-day EMA.

This EMA is still following a downward trajectory (even though to use the current jargon its second derivative has declined to virtually zero as it is now leveling out).

The volume on SPY was just about average and I would be very careful on the long side in today’s session if the S&P 500 proxy makes it above 93.



KBE, which tracks the KBW Banking Index, is also facing a similar challenge to that seen for SPY.



Despite constitutional turmoil, a government which seems paralyzed, and a very gloomy economic backdrop, the UK’s currency - sterling - is continuing to rally.

However, in harmony with the rest of my current analysis I believe that some traps are about to be set by the bears and I would be looking to sell sterling (or go short FXB if you can borrow it from your broker) at the $1.5650 level.



Good news to report on three of last week's recommendations. Prudential pulled back to moving average support as suggested last Friday morning and rallied by more than 10% yesterday.



A very similar story to the one above for PRU could be said about Echostar Communications (DISH), also has recommended here last Friday.



Another recent recommendation, Microsoft (MSFT), has now rallied back to a critical level where, if the bulls really do have the wind behind them, the overhead challenge should be surmountable.

I am skeptical.



The best looking chart on the long side today that I shall mention is for Genzyme (GENZ) which has a bullish pullback pattern towards moving average support.



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