Four Clear Trends in a Sea of Mixed Messages

Bulls say this a great market, with the indices pressing into multiyear highs. Bears tell a different story, noting sharp divergences between sectors and macro conditions favoring lower prices.

The rest of us are stuck in the broad middle, not knowing whom to believe in this odd market environment.

Let's take another look at the big picture, after last week's seemingly go-nowhere, do-nothing ticker tape. Unfortunately, we shouldn't expect crystal clarity from this small exercise in market prediction.

But it might tone down the endless shades of gray we're forced to consider in making position choices these days.

Let's start with the banking sector. The group went vertical last week after chopping around a multiyear breakout line for almost five months. Frankly, I was about to give up on the bank rally I predicted more than two months ago.

But group dynamics finally fell into place after solid first-quarter earnings and encouraging Fed comments about interest rates.

How long will this rally last and how far will it carry? I'll rely on my original commentary to find an appropriate target for the uptrend. At that time, I said the rally eventually would rival the 40-point recovery we saw back in 2003. This places the Philly Bank Index over 140 in the months ahead.

Unfortunately, we're swimming in a vast sea of mixed messages these days. While the bank breakout is highly encouraging, other market movers are pointing the broad tape in the other direction. In particular, the much-heralded rotation into big-cap tech stocks has turned out to be a total bust.

Just look at the weekly chart of the Nasdaq 100 Trust(QQQQ Quote) and its drag on the broad market. The exchange-traded fund dropped into a broad sideways pattern after hitting its 2006 high in January. After failing to break out in early April, the stock has been meandering in a tight range and showing no rush to move in either direction.