Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
(note: facetious financial website hyperbole intended)
Yesterday began the "obvious" oversold bounce. By obvious I simply mean it was due after a pretty hectic selloff, but with the poor close Tuesday it was not necessarily obvious that it would begin in the overnight futures session. A negative open yesterday would have created a low risk 'trade' – unfortunately the market did not give that opportunity. This morning futures continue the bounce.
Day one of the move up was not enough to get the S&P 500 through the very obvious 50 day moving average, around 1373. But even if regained, the more important line is the mega trendline created from connecting the lows of the move from early October. It is difficult to put an exact number on it, because if you change the angle by a degree or two you get a different outcome but let's call it 1385-1390ish. But the key thing to note is Monday's selling took the index to that support, and Tuesday's selling broke through it. Now for the bulls to continue their 2012 party – after this oversold bounce finishes – this level needs to be recaptured. To be safe let's say it's important to get back over 1400 and stay there.
Please note, the DJIA has a very similar setup but the index formerly known as NASDAQ and now goes by NASDAPPLE has not broken this trend line. The Russell 2000, on the other hand, is just a big mess.
As for the next 24 hours – key reports from Google (GOOG) tonight, JPMorgan (JPM) and Wells Fargo (WFC) tomorrow morning, with Chinese GDP overnight. So the market most likely will gap one way or the other tomorrow morning as well. Janet Yellen's speech last night was not quite as overtly "free money-ish" as I assumed it would be.
EDIT 8:32 AM – weekly claims in relatively poor at 380,000 but it is getting blamed on the Easter holiday.
EDIT 8:45 AM – the weekly claims data has taken some steam out of the market as futures are back to flat.
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