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Morning Matters:

The Easy Money Is In And Now The Hard Work Begins
by Geoff Garbacz

Just seven trading days ago the world looked like it was coming to an end now all is well remain calm. Maybe. There are five litmus tests that still need to be passed. They are as follows.

1.The S&P 500 needs to move back above its prior high before the recent selloff. This level is 1131.23.

2.The 50% retracement from the October 2007 high to the March 2009 low needs to hold on the Dow Jones Industrial Average. This is a hypothesis Phil Erlanger has about 50% retracements that is playing out each day. For more we would direct you to www.goodmorningwallst.com.

3.The market is due to pause as a six day winning streak on the S&P 500 is atypical and seven or eight day win streak is even more rare. The last such win streak ended on April 16th at six days. The high was in for the market two weeks later. How it recovers from any selling is key.

4.The recent retracement from the June high to the July low needs to remain above its 61.8% retracement which is 1085.27.

5.The Russell 2000 needs to start outperforming the S&P 500. It is about to as well as the Erlanger Rate of Change (EROC). For more information on the EROC one should visit www.erlangerchartroom.com.

Five simple tests to follow and keep your mind at ease. If these fail to remain positive, then it will be time to batten down the hatches.

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