Short-term bottoming process continues

The equity markets continue to support our observations noted earlier (see June 6 comment). A few noteworthy considerations:

• The February lows are holding. A continued basing pattern around these lows will enhance the significance of this support level.
• Nasdaq's relative performance has been waning relative to the S&P500, a sign that the risk profile is shifting to the "bluer" chips. Note in our Stockcharts.com Market Tour that small caps performance has begun to trail large caps.
• Typical seasonal strength in June/July
• The dollar, which has trended inversely to stocks, has hit resistance at its April 2009 highs (while MSCI Pacific index finds support at the Q4 08-Q1 09 highs).
• As for market sentiment, the Volatility Index (VIX) closed below the RSI 50 level (albeit slightly) while Put/Call remains stubbornly high (both contrary indicators).