Editor’s note: Serge Berger, the head trader and investment strategist for The Steady Trader, will be providing the Daily Market Outlook until Sam Collins returns on June 27.

Yesterday started out with some leftover effects of Friday’s options expiration, which pushed the market higher early in the session. But around noon, the market ran out of steam and traded in about a five-handle range for the remainder of the day. So, overall, it was a pretty uneventful session. Volume was weak, which is not all that uncommon for a summer Monday. However, market breadth was almost 3-to-1 positive on the NYSE, i.e., more advancers than decliners.

Technically, the S&P 500 has had some upside follow-through, but still managed to only recapture a little more than half of the larger sell-off from June 15. The area I am watching is the downtrend (blue line) that has held as resistance since June 7, and currently comes in just around $1,290. A clean daily break above it on decent volume and participation from key sectors could be a good signal for further strength. 

Note that the stochastics oscillators are just coming out of overbought levels and, as such, may just allow the market to bounce a little more here. But again, without healthy participation from the “important” sectors, such as the financials, and high beta stocks like Apple (NASDAQ: AAPL) it makes it difficult to trust this market, to say the least.

Another factor that did not lend itself to further confidence in the market’s move higher was yesterday’s performance in non-durables stocks. Companies like Kellogg (NYSE: K), Pepsico (NYSE: PEP), Procter Gamble (NYSE: PG) and others outperformed yesterday. The fact that those traditionally defensive stocks were bid higher does not feel like people are willing to take on more risk at this stage. 

Health-care stocks also outperformed in yesterday’s trade, and they, of course, belong to a defensive sector. Below is a chart of the Health Care Select Sector SPDR (NYSE: XLV)

It remains a waiting game at this stage. Until we get more clarity out of Europe on the near-term fate of Greece, until the U.S. debt ceiling expansion gets approved (or not), or until we get good follow-through to the upside in key sectors and stocks, it continues to pay to play good defense.

For one stock that could deliver some quick upside, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.