SHORT TERM: stocks open higher, turn mixed, then higher again
Overnight the Asian markets were sharply lower responding to the selloff in Europe/USA. China’s SSEC, which started this selloff, rallied 3.9%. Europe came in 1.2% lower again, but our stock index futures were rallying nevertheless. At 8:30 the revised Q4 GDP was released, and was adjusted lower, from 3.5% to 2.2%. For 2006 GDP is now forecasted to have grown at 3.1%, with only 1.9% growth in the Core CPI. At 10:00 Bernanke and Kohn both addressed the House Budget Committee. Stocks opened higher, pulled back for 15 minutes as the NDX/NAZ made new lows for the move, and then turned sharply higher. What is important after a selloff is always the nature of the response to that selloff. This takes a few days to unfold, but usually gives an indication of what is to come in the weeks ahead. We should have some idea by early next week. After yesterdays extreme short term oversold levels, a rally of some sort was expected. Bonds are down 1/4 point, Crude is $1.00 lower, Gold is $17.00 lower, and the Euro is also lower. Technically, most of the damage for this correction was done all in one day. Support for the SPX is at 1378, and then 1361. Overhead resistance is at 1417, and then 1432. These are all pivot points that were established during the advance. Yesterday the SPX closed just below the 1404 pivot created in early Jan. This should act as short term support, while 1417 acts as short trerm resistance. After a few days we should get an idea about this correction, and how it is unfolding. Best to your trading!
MEDIUM TERM: neutral
LONG TERM: bullish.