2-15-2012
The markets came off their lows yesterday to finish essentially flat. At one point, the DOW was down almost 90 points but broke even, just like the both the S&P and NASDAQ. The markets rallied hard in the last just shows how resilient the markets have been (see 1 day DOW graph).
DOW 1 Day - Strong End of Day Rally to Breakeven on 2-14-2012
The internals are showing the uptrend is looking a little tired. Up Volume was just 36% on the NYSE and breadth was negative with decliners beating advancers by almost 2 to 1. The markets are becoming more selective, or narrow, in buying.
The midterm outlook for stocks is still bullish, but the short term is showing signs of fatigue. The only thing I worry about is that sometimes short term pullbacks turn into a more severe correction as stop losses get triggered and computerized trading kicks in.
Then, about an hour before the close, the EU announced it would postpone the meeting in Brussels to give Greece their next bailout tranche. They apparently want even more concessions. One would think this would spook the markets and test just how resilient these markets are. It has been a news driven market, and this news should be decidedly bad.
But the markets rallied strong into the close instead. This tells me something is in the works behind the scenes and possibly the big, institutional money is taking advantage.
We are just under resistance (red line on graph), and if we do rollover, support (green line) is around 12,750. But if we break through resistance, momentum traders will pile on and fuel the rally. We are at a pivotal point here, and the next day or so will be key.
DOW 1 Yr At Resistance with Support at 12,750 on 2-14-2012
In overnight trading (Tuesday 10:00 p.m. CST) the Asian markets are in the green. Gold, silver, and oil continue to rally. The US dollar is stronger against the Yen on expectations of easing by the Japanese Central Bank, but weaker against the Pound and Euro.
Our US equity futures are in the green too. The DOW futures are up 63 points, the S&P futures are up 7 points, and the NASDAQ futures are up 12 points.
Economic data out today include MBA Mortgage Applications, the NAHB Housing Index, Industrial Production, and Empire Manufacturing. We also have revisions of the Producers Price Index (PPI), which should be interesting and often looked over and forgotten.
We also have 16 S&P companies reporting earnings. Among them are Dean Foods (DF), Dr.Pepper Snapple (DPS), Devon Energy (DVN), Deere & Co (DE), Abercrombie & Fitch (ANF), NVIDIA (NVDA), Marriott (MAR), NetApp (NTAP), CF Industries (CF), and CBS (CBS).
It is a broad swath of industries and sectors providing solid clues as to how well the recovery is taking hold. Watch for the revenue growth, not the actual earnings to determine the trend going forward. But for right now at least, is seems the rally will continue.
