SHORT TERM: friday’s monoline rally continues, DOW +189
Overnight the Asian markets were mostly higher, but Hong Kong and China were lower. Europe came in about 0.80% higher, and ended their day +1.50%. The US market opened mixed, and the SPX dropped down to 1346 by 10:00. That was the low for the day. At 10:00 the NAR reported that January existing home sales dropped 0.4%, and inventories rose. But the reported levels were better than expected and the market rallied. Also near 10:00, FED governor Kroszner’s speech regarding current risk management was released: http://www.federalreserve.gov/newsevents/speech/D7BB4B12FA20478A9F0504752AE2190F.htm. Within the next hour the SPX rallied to 1363, right at the 1364 EW resistance pivot, and a pullback to 1351 followed by 1:30. As the market started to edge its way higher, at 2:30 S&P reported that they had taken the monolines MBI and ABK off their negative credit watch list, maintaining a AAA rating. The market spiked on the news hitting 1370, as both MBI and ABK rallied with many of the financial stocks. After a pullack to 1359 by 3:00, the market started rising again, and made new highs for the day after FED governor Mishkin’s speech on inflation was released at 3:30: http://www.federalreserve.gov/newsevents/speech/FEB22F7FF19A4DAC8BAC77C755F96DFD.htm. Lots of FED talk this week. Nearing the close the SPX hit 1374, a new intraday high from the 1317 low posted two weeks ago. At the close the SPX/DOW were +1.45%, and the NDX/NAZ were +0.85%. Bonds lost 1 1/4 points, Crude gained 40 cents, Gold was off $6.00, and the Euro was lower. Tomorrow before the open the core PPI will be released, then a speech by FED vice chairman Kohn on the economy and monetary policy will be released around noon.
Support for the SPX has now risen to 1364 and then 1344, with resistance at 1383 and then 1410. Short term momentum is overbought. Since the SPX did put in that 1370 print today, would expect this rally to continue to the 1396 area to form a double top. It does appear at that level, the near term indicators will be overbought with negative divergences. This is exactly what occurred at the B wave high of 1524 in December. Refer to strategy in weekend post. Best to your trading!
MEDIUM TERM: uptrend from 1270 continues as trading range expands.
LONG TERM: bear market