Ahead of a two-day EU summit traders were looking for signs to determine whether the market was about to surge or nose-dive.And trader Steve Cortes, founder Veracruz, a research and consulting firm, thinks the market is getting an important sign from cyclicals.“Caterpillar is trading at a new low for 2012 and the Morgan Stanley Cyclical Index made up of a basket of cyclical stocks dropped to negative for the year during mid-day trade,” he says.

Cortes takes the price action in both CAT and CYC as two signs that reflect not only weakness in Europe - but also China .“I really believe cyclical stocks are getting it right. – they are international in nature,” and the woes facing the market are international. Ultimately Cortes believes weakness in cyclicals will be reflected in the S&P and that any further advance is very unlikely.Trader Stephen Weiss, managing partner at Short Hills Capital , shares the skepticism. He’s very focused on Europe and a pattern that’s emerged. “Europe tends to make an announcement – not follow through and then the plan falters. How much more of that can the market withstand?”

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