While the S&P 500 refuses to break down, it also refuses to “break up”.

The 2100 level, not far off the all-time high, has proven to be “bridge too far” at this point. Traders seem unable to decide whether a weak payrolls number and a Fed on hold outweighs the advantages ( as far as stock traders go) of continued low interest rates.

If the economy is doing so poorly that the Fed cannot hike 25 basis points without the world seemingly coming to an abrupt end, then the thinking is “why are we buying stocks at these levels?”

On the other hand, as long as interest rates are going to stay ultra low, then “where else are we going to obtain yield?” is the other question.

Thus we appear stuck in a trading rut where the bulls are unable to muster enough buying enthusiasm to take stocks higher and through resistance while remaining friendly enough towards stocks as a whole preventing them from dropping significantly lower.

Here is the same chart. This time I have drawn in some shaded areas on two of the indicators below.

Look at how FLAT both the ADX/DMI and the RSI indicators are. Neither one has much movement up or down. What this means is that the underlying market that they are overlaid against has little in the way of conviction at this time. Simply put – most are unsure what is coming next and neither the bull camp or the bear camp is able to grab the reins and run with this thing.

You do have give what edge that there is with the bull camp however because of the current positioning of the longer term moving averages ( 50 day and 200 day). Price is above both and the 50 day is above the 200 day.

For this impasse to be resolved so that the range of price movement increases and the potential exists for some sort of more durable trending move in one direction or the other, the Resistance level noted needs to be convincingly best, preferably on high volume or the support level down near 2025 needs to fall.

It was interesting observing the price action in the Financials yesterday. It goes without saying that the payrolls number was so abysmal that there is NO WAY the Fed will move on interest rates this month. That was NOT GOOD NEWS For the Financials as this ultra low interest rate environment and “flat as a pancake” yield curve is not at all conducive to good profits in the banking sector.

When the Financials opened for trading, they immediately began moving lower, sharply lower, but by the end of the day they had recovered most of their losses.

 The price recovery kept them within the uptrending price channel.

If the S&P 500 is going to be strong, and push through those highs, it is going to need the Financials to show some real strength. The question is are they going to be able to do that in this flat yield curve structured environment.

I would keep an eye on “XLF” to try to answer this question. If it can push past this week’s high near 24, then the S&P 500 has a chance at finally getting past 2100. If not, then the probability that the index can clear 2100 drops. One cannot have a soaring stock market unaccompanied by strong financials.

Keep in mind that a very good portion of the losses in the stock market to start this year came from falling energy stocks as well as a general selling spree across many sectors. With oil recovering like it has and with the prospects of a further meltdown in oil prices having faded, energy shares are not going to implode lower. While they may indeed setback, they are not going to be the huge drag they were on the index previously. That would have to come from other sectors.

One of those sectors that it is CERTAINLY NOT going to be coming from anytime soon is UTILITIES.

AS long as the Fed does not hike and as long as investors are starving for yield, they will be in love with stocks from this sector.

When you break down these various sectors within the universe of stocks, you can find some that are performing very strongly. Others are so-so. As of yet I do not really see any of the sectors falling apart.

Here is the Materials sector:

 If the economy was really ready to rollover, we would see it on this chart for certain. So far, it is holding up fairly well.

Health care stocks, while well off their all-time highs, are still holding fairly well also.

 What I am looking at is various sectors across the equity universe and not really seeing any signs of things coming unglued. That leads to my view that many investors, while not especially enamored with US growth prospects, also do not see things as dire enough to expect some sort of wholesale panic out of stocks. While the economy is not strong enough at the moment to support a rate hike, neither is it weak enough to lead investors to anticipate some sort of collapse.

It looks to me like this is what we can expect into the immediate future until something occurs that would bring about a more drastic shift in sentiment.