Final Hour: S&P Flirts With 1,900, Breakthrough Straight Ahead

NEW YORK (TheStreet) -- Markets proved gun-shy at the psychological 1,900 barrier for the S&P, briefly breaking through before pulling back to linger below that hurdle for much of the session.

But we'll get there soon if not today, despite all the logical reasons fund managers espouse not to: valuations are high, this bull market is old, my jargon-y technical charts say it's time for a correction.

That's because key macro supports for equities remain. The European Central Bank has indicated it may loosen monetary policy as soon as next month while China has promised capital markets reforms. And perhaps more crucially, the Fed isn't hiking rates any time soon.

So valuations and mixed economic data may well be arbitrary so long as they don't skyrocket or nosedive respectively -- a scenario that no-one expects. And markets will inch higher even while volatility grows in sectors with high valuations or without earnings (read, many new media and biotech stocks).

Tuesday saw tech stocks continue their divergence from broader indices, with the Nasdaq faltering after outstripping the Dow and S&P on Monday. Twitter (TWTR) and Cisco (CSCO) were both off more than 1% in afternoon trade while Google (GOOG) and Amazon (AMZN) inched higher. Even as the crowd shuns so-called momentum stocks, some brokers have begun to call time on the tech sell-off. Citigroup likes Facebook (FB) Amazon and Google after their recent pullbacks, suggesting the stocks have solid investment fundamentals and skittishness is unjustified.

Meanwhile, all indications point to solid appetite for the Alibaba IPO this summer. A word of caution though: more than 80% of IPOs over the past six months have had negative earnings, James Investment Research portfolio manager David James notes. And that's a sure sign he says, of a frothy market.

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