Markets traded marginally lower as jitters pertaining to the Greek debt situation resurfaced after Standard & Poors indicated that a further downgrade of the country to “selective default” was likely.   Negotiations with private creditors are ongoing as each side digs in their heals regarding the coupon rate to be paid on the swapped debt obligations.   It is becoming increasingly probable that a non-voluntary default situation in Greece will occur, triggering credit default swaps, which at this point are indicated to be highly collateralized, mitigating the effects of a more disorderly default situation.   The debt situation in Greece looks set to overhang the market for some time still.

Looking at the charts of the major equity benchmarks, equities have noticeably stalled around present levels over the past few days.   Candlesticks on the chart of the S&P 500 have the appearance of dojis, an indecisive candlestick pattern that shows the debate between bears and bulls at present levels.   For the past few days, this large cap index has found support around 1310, pulling back to around this level intraday and then trading to the flat-line by the close.   A catalyst looks to be required to dislodge the market from this bull/bear battle, whether it be to the upside or to the downside.   Catalysts over the remainder of the week are numerous, including the Fed’s announcement on Wednesday, progress on European debt talks, or the report on fourth quarter GDP to be released this Friday.   A break of support at 1310 would likely lead to a pullback to test the next level of support around 1275 with downside risks extending as far as the 50-day moving average around 1250.   Momentum indicators remain at the most overbought levels since last May; a pullback at this juncture would be healthy to regain market momentum.

Earnings from Apple that were released on Tuesday after the closing bell could also influence the market out of this short-term range.   Apple blew away expectations, topping even the highest estimates that analysts had imposed upon it.  

Commodities continue to be an interesting market to watch in order to determine the strength in the economy as well as in equities.   The CRB commodity index has been declining since May of last year.   However, recently an interesting pattern has become evident: a head-and-shoulders bottoming pattern.   The present neckline of this pattern around 315 coincides with the same level as the upper limit of the declining trend channel that has remained intact for many months.   The pattern projects an upside target to 335, or 6.3% higher from present levels.   On a seasonal basis, commodities gain strength in the first quarter as economic momentum ramps up into the spring.   Copper tends to be the beneficiary of this commodity push.   Copper is presently hitting against resistance at its 200-day moving average, a significant hurdle to overcome given the extent to which this commodity is now overbought.   Copper which is an industrial metal and leads the market is a great sign the markets will move higher however with copper at resistance along with equities which are grossly over bought as well a pullback were would be healthy to regain strength and push higher.   Caution remains high while the markets remain at these levels.