After the U.S. markets hit record highs last week, Wall Street legitimately pull back as investors focus on a renewed concern in the eurozone to reap some profits after a series of impressive bullish trading sessions. Indeed, the NYSE index hit its highest level in 5 years supported by encouraging U.S. data.

The scenario of a soft recovery seems to be confirmed in the United States where the labor market has improved further in January, while the figures for the previous two months were revised up sharply at the same time. Meanwhile, growth in the U.S. manufacturing sector rose in January to its highest level in nine months with a very high level of new orders, according to the results of the monthly survey from the ISM.

All statistics seem to confirm that the U.S. economy is slightly recovering. On the micro-economic field, results of companies are also reassuring. 75 out of the 250 companies that already released their earnings did better than it was expected. It is the best percentage in 4 years. For example, companies as Exxon or Chevron published better figures than expected in the fourth quarter thanks to improve in petrochemical operations and refining margins.

Therefore, it seems beneficial that Wall Street finally pauses after a 6% rally in January, its best start for the early 90s. While European markets have fallen due to new tensions on the yields of Italian and Spanish sovereign debt, U.S. brokers took some profits. Political risk in Spain, calls for the resignation of Mariano Rajoy, and the next elections in Italy led to a rise in bond yields, which reflect a slight return of risk aversion.

The dynamics of the SP 500 is strongly bullish in daily data above the 1460-1480 area which also refers to the 20-day moving average. We can see on our chart that the market hit the blue line which corresponds to the 1515 points area. After this, the SP 500 started a slight consolidation towards 1470 points. A pull back on this level will give to traders a buying opportunities and a possibility to continue this bullish trend towards 1550 points. On the other hand, there could be greater consolidation in the direction of the rising wedge in blue on the chart around 1415 points. We wait for an exit of this trading range (1470-1515 points) to take position in the direction of the current trend. We will trade the SP 500 E-mini contract on CME E-mini markets.