Monday Market Movement

Ah, that was a little better – but was is good enough?

Let's keep in mind that this morning I said it was 12,750 OR BUST!  Well, we made it with 28 points to spare but all that does is keep us from selling everything and running away screaming, we're still a long way from putting on our horns again.  We stuck to our plan and rolled up our index puts, keeping our downside protection ahead of who-knows-what tomorrow, where Citi earnings will either confirm or deny today's rally long before the markets open.

Then there's MacWorld, with Steve Jobs giving his keynote at 1pm but, unless he's unveiling the IRobot or the ITablet I've been waiting for, it's really going to be all about the numbers.  My hopes for tomorrow are pinned on the very poor expectation for C (writing off $24Bn, losing $1 per share on operations (up to $3.50 with write-downs), laying off 20,000 people are whispers) and the very poor expectations for Retail Sales (0.1%) and the very low expectations for the Empire State Manufacturing index (13)  to give us a positive day as the bar is now set SO LOW that the United States may as well just shut down now if we can't beat them.

My big concern for tomorrow is the unrealistically low expectation for the PPI (0.2%) but it is possible as oil averaged a little lower in December and everyone was marking everything down to dump inventory at the end of the year but we'll also get more realistic numbers from Europe in the morning, which will give us some interesting data.

Frankly my entire short-term positive outlook is based on the fact that expectations are now sufficiently low for most companies to just step right over the bar without getting too badly burned so it's a cynical sort of bullishness at the moment.  We've had our healthy capitulation but it would be a mistake for the market to run right back into a manic phase but, as I've been saying, if we can just consolidate around 13,000 for a while, we'll be ready for the Nasdaq to lead us to the promised land.

The Tech sector finished right at the 2.5% rule for the day but, unfortunately, materials was the market leader with a 3.5% move in PPI component suppliers as the dollar continued to tumble against near-certain Fed action.  We're probably going to get another test of dollar lows at 74.50 but, after that, a decent earnings season will bring buyers back and we may start making some progress.

Looking at the Big Chart, even with our significantly lower expectations, we are still a sea of red:

We were watching the DAX for quite some time and the "must hold" on the Dax has actually been raised 200 points, an indication of how critical that index has become in the international markets.  We'll be watching them closely, as well as the rapidly falling Hang Seng and the Nikkei, which looks like it's on a kamikazi mission to 12,500 as the yen keeps rising against the dollar, threatening to undo the carry trade and wipe out thousands of speculators.

It's all about the US banking tomorrow, despite whatever feel good noises we get from Mr. Jobs, it's just not going to offset write-downs in the tens of billions so let's watch our levels and, for US markets, let the NYSE be our guide.  If they can't hold 9,400 then we may have a long wait before we see another green box in the US markets.