Thursday finished the day on the highs for another day of gains across the broader markets.  Volume on the NYSE and Nasdaq came in lighter than Wednesday’s action, but futures were modestly higher on the day.  The VIX closed at 20.63 and the TRIN at .75 bullish on the day.  Gold fell $1.10 to $1119 an ounce and oil closed up $1.73 to $79.06 a barrel.  The bullish day received a big surprise after the bell.  About 4:30pm eastern the Fed surprised the markets with a rate change.  Futures reacted with a drop into the days lows, as I type comments we sit under yesterdays low. 

Fed raises discount rate to 0.75% from 0.50%– Bloomberg Reiterates that it will leave the main rate at low levels for an ‘extended period’  Federal Reserve says shortening typical maximum maturity for primary credit loans to overnight, effective March 18 – Reuters -Update-
SAYS RAISES MINIMUM BID RATE FOR TERM AUCTION FACILITY TO 0.5 PERCENT. SAYS CHANGES DO NOT SIGNAL ANY CHANGE IN OUTLOOK FOR ECONOMY OR MONETARY POLICY. SAYS CHANGES INTENDED AS A FURTHER NORMALIZATION OF LENDING FACILITIES. CHANGES NOT EXPECTED TO LEAD TO TIGHTER FINANCIAL CONDITIONS FOR HOUSEHOLDS, BUSINESSES. OUTLOOK FOR ECONOMY, POLICY REMAINS ABOUT AS IT WAS AT JANUARY FOMC MEETING.

So with this looming over the market we can expect a weak globex session and for that weakness to make for a large gap in the morning.  Markets don’t like surprises and this was a pretty big one.  The market was short term overbought and now we’ll open (assuming the markets continue this drift lower tonight) with oversold conditions.  Usually we see the market try to digest and shake off part of the losses with such a big move in the afterhours.  The week will definitely get a haircut if the market can’t shrug off part of the losses we are currently seeing in the globex session for futures. 

Look for 1081 ES support and 1781 on the NQ as key levels to test early on.  Futures have not seen the weekly pivots, but that would be really extreme at this point to expect to see.  Anything is possible but that would be a panic exit to see that low on the markets.  Friday is also option expiration for February options, which usually leads to higher volume and some tug of war once the market is in range after that first 90 minutes.  This news may help us not sit in such tight ranges, so keep a quick hand and eye ready off the opening.

Economic data for the week (underlined means more likely to be a mkt mover):  Friday 8:00 FOMC Member Dudley Speaks, 8:30 Core CPI, 8:30 CPI.  Monday nothing due out.  Tuesday 9:00 S&P Composite 20 HPI, 10:00 Consumer Confidence, 10:00 Richmond Manufacturing Index, 5:00 FOMC Member Bullard Speaks.  Wednesday tentative Fed Chairman Bernanke testifies, 10:00 New Home Sales, 10:00 Treasury Sec Geithner Speaks, 10:30 Crude Oil Inventories.  Thursday 8:30 Core Durable Goods Orders, 8:30 Unemployment Claims, 8:30 Durable Goods Orders, 10:00 HPI m/m, 10:30 Natural Gas Storage.  Friday 8:30 Prelim GDP, 8:30 Prelim GDP Price Index, 9:45 Chicago PMI, 9:55 Revised UoM Consumer Sentiment, 9:55 Revised UoM Inflation Expectations, 10:00 Existing Home Sales.

Some earnings for the week (keep in mind companies can change last minute:  Friday pre market JCP, PCG, SHPGY and nothing after the bell. Monday pre market LOW, OIS, and after the bell BRCD, JWN, RSH, XNPT.  Tuesday pre market BKS, HD, HURN, IDA, ISLE, LIZ, M, MDT, SHLD, TGT, and after the bell ADSK, DWA, ONXX, OSIP, WYNN.  Wednesday pre market DLTR, FSRV, GRMN, SKS, TJX, TOL, UNFI and after the bell ESRX, GDP, NTES, CRM, SMSI, JAVA  Thursday pre market ABK, CSE, FTO, ITWO, MYL, NEM, ZEUS, OMG, ZLC and after the bell DECK, DRYS, ERES, GPS, TIE.  Friday pre market BIOS, FRO, GAS, TTI and after the bell AES.  

SPX (S&P 500) closed +7.24 at 1106.75.   Support: 1090.95, 1083.89, 1068.85, 1058.14.  Resistance: 1109.98, 1119.41, 1127.78, 1150.45.