The markets have been running higher since New Year's Eve, but there are reasons to be cautious after yesterday's selloff.
Consider these points:
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The S&P 500 has been sitting near a peak from December 2007. Almost every one of these peaks from the 2007-2009 skid lower has turned into resistance, and it seems to be happening again.
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The S&P 500 has been showing bearish MACD divergence all month.
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Treasury yields (10- and 30-year notes) are both at potential consolidation/resistance levels after melting higher along with stocks.
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Housing groups are weak. Builders have been a major force driving this market higher for the last year, but they have been lagging in the last month or so. Yesterday's data was less than stellar, and if investors take profits there could be plenty of selling in these names.
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Political risk could return. Italy has elections later this month, while attention in Washington could focus on sequestration issues. At the same time, attention is shifting away from corporate earnings.
I am not calling for a major crash, but a case can be made for the S&P 500 to pull back to somewhere between about 1500 or 1470.
Disclosure: I am long TZA, a triple-leveraged short small-cap fund.
(A version of this post appeared on InsideOptions Pro yesterday.)
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