The market got some pretty good data Thursday. But I still see some serious red flags for the U.S. economy.
On Thursday morning, we saw a lower-than-expected continuing jobless claims number showing that fewer people applied for new unemployment benefits in the week ending July 27 than in any week since early 2008. In addition, China's official Manufacturing Purchasing Managers' Index rose to 50.3 for July, above the 49.9 that economists expected.
(Read more: China PMI could mark end of negative data surprises)
On the other hand, growth in U.S. gross domestic product is at 1.7 percent, mortgage applications are at a two-year low because of rising interest rates, and earnings have been mixed at best. I believe this is a market driven primarily by Federal Reserve policy.
The S&P has now crossed the 1,700 level, but the e-mini futures have been lagging. The market has enjoyed a nice run in the last month, and I am looking for some profit-taking. For that reason, I am selling the S&P e-mini.
So what levels am I watching?
Resistance is 1,702 to 1,705; after that, it's 1,720 to 1,725. Support comes in at 1,670, and then 1,650.