After a precarious dip the week prior, equities as measured by the SPX (S&P 500 Index) spent all of last week north of the 1300 level.

U.S. stocks opened higher Tuesday after the holiday weekend as the SPX added 10 points and the Dow rose 100 points.

Closing at 1317.82 last Friday, our market technician David Chojnacki pointed out throughout last week that the SPX has technical support at 1312 and 1300 although there is overhead resistance at both 1320-1325 and 1337. However, we continue to see daily headlines regarding Europe, in any way shape or form, having the ability to move markets not only temporarily, but seemingly for days, if not weeks on end in one direction or the other. For it was just two months ago in mid March where the daily “tone” of the U.S. equity markets were briefly relieved from its Euro hangover as the SPX challenged new highs in spite of the presence of a falling Euro.

Now however, with the Euro hitting new recent lows it seems day after day, U.S. equity markets feel hinged again to the movements of the currency, which, based on last summer’s fallout and symptoms, leaves everyone with a very uneasy feeling as we work our way into June still recalling the pain of the late summer of 2011. An encouraging sign, although it has not happened in recent recollection and certainly not during the month of May, would be to see a rally in U.S. equities concurrent with additional weakness in the Euro, and or even a stable to flat Euro move, but this still remains to be seen if it will ever indeed occur again.

ETF options flows were rather light last week, with little to note in directional trades being established the week after May options expiration, although we do continue to see caution in the Financials sector which has recently been trounced by JP Morgan’s (NYSE: JPM) announcement of a large trading (or hedging, depending on whom you speak to) loss. Put buying has been in vogue in the sector for at least three weeks now (and we have seen strikes as low as 12 and 11 trade, given Financial Select Sector SPDR (NYSEArca: XLF) had a $15 plus handle just a month ago), but one is tempted to think the selling pressure may well be overdone, and perhaps “value” buyers will rear there heads one of these days. In fact, based on net flows data last week (we will go in more depth below), some institutional “nibbling” in the sector was evident last week.

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