No one can dispute the fact that the S&P500 has had an amazing run since November 2012. Once the President and the Congress signed a deal to avert the Fiscal Cliff at the beginning of this year, investors have piled into US equities. Any weakness have been bought notwithstanding macro or corporate news.
SPY, the S&P500 ETF, is now at the top end of its channel and looks tired. Case in point, yesterday's price action. What should have been a good news for equities - April retail sales beating estimates handily and the ensuing sell-off in bond - did not end up being so - S&P500 managed to eke out a small gain. Moreover, the gains came from defensive sectors rather than cyclical names.
Bottom line, it looks like equities are in search of marginal buyers to drive them higher. Sure the big trend is still up, with the S&P500 breaking above its 2000 and 2007 highs, but looks like we are heading into a short-term consolidation. I would short SPY at these levels with a very tight stop loss.
