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S&P 500 Still Has Technical and Fundamental Support: New Albany’s Lewis

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In the era of unprecedented Mega Millions and Powerball jackpots, it's safe to say that people love big round numbers. And the same is true on Wall Street, where the focus right now is on the S&P 500 index and the 1,300 level.

Although April and the second quarter have gotten off to a choppy start, with stocks slumping seven out of 10 days, tactical bulls like John Lewis of New Albany Capital Partners aren't ready to pull the chute just yet. On a fundamental basis, Lewis says the market is fairly valued right around 1,300, but he's keeping a close eye on some interesting metrics that could warn of trouble.

One of those is the recent phenomenon of crude oil and stocks moving in the same direction, which leads to the question: How can expensive oil and Middle East strife be positive for stocks?

Lewis says they're not, and he goes on to explain to Macke and me why he's watching this broken oil-stocks correlation trend so closely.

A sudden spike in Treasury yields north of 4% would also be a warning sign that things could get ugly -- and costly -- for consumers and borrowers, says Lewis, who before founding New Albany served as the lead portfolio manager of a U.S. long-short equity hedge fund.

Also, on a purely technical basis, this former U.S. Marine is prepared to take some light fire until the 1,250 level, at which point he says a re-evaluation would be in order.

Until then, stay alert and on guard, but most of all, calm.

And remember we're here to help guide you through this market. Offer your comments below or send them to breakoutcrew@yahoo.com.

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