Two big events came and went today without much to say other than we saw some decent volatility intraday. Not much more than that can be said about this day, which I thought would be far more powerful in nature regarding price movement. I expected fireworks, but got just a sparkler or two. Maybe those fireworks will come tomorrow pre-market when European Central Bank President, Mario Draghi, talks about his plans to help solve the European crisis. You’d think there would be some decent action based on his words. We’ll just have to wait and see.
So two big events came and went, and there’s not much to add, other than the fact that the Mr. Bernanke is promising low interest rates basically for as far as the eye can see. That means he thinks the overall environment is poor, but even that couldn’t really push the market too much lower. Pre-market had a chance to move the market as well with the ADP Jobs Report, which came in rather nicely for the bulls. A bit of a surprise there, but it did little to move things. The ISM Manufacturing Report was also supposed to be a market-mover as it came out thirty minutes into the trading day and showed, once again, we’re in contraction, but barely, so with a reading just below the flat line at 50.0. or 49.8 to be exact. So it was all in all a day of some big events that did little to the charts technically and to overall price action. Maybe tomorrow morning we’ll get the fireworks I was so sure would take place today.
Of all the reports out there, from the ADP to the ISM Manufacturing Report on Friday, I have thought all along that the ECB Report is the most important. The answer as that Europe is the center of the world’s problems. What ECB President Draghi is, or is not, able to do will go a long way in deciding which way our market ultimately breaks. If he can convince everyone that he has things under control, we have a much better chance of hanging in there on Wall Street. If the market is not convinced he has control, we can fall hard and fast. It doesn’t mean the market has to crash, because I don’t believe for a moment it will right here.
There’s always our Fed to pump the system day and night to keep things from falling apart. I don’t like that behavior, but that’s what it appears he will do. So I think, if the market doesn’t like the words out of his mouth over in Europe, we could fall 2-3%, which would unwind things nicely, although now we are not overbought here at all. The market can climb easily, if it gets the right news. The ISM Manufacturing Report on Friday, of course, matters quite a bit, but that falls back into the category of Fed Bernanke coming in with more economic stimulus, if it’s bad enough. The real recessions and depressions are in the Eurozone, thus, Draghi is in the spotlight tomorrow morning.
If one takes the time to study all of the daily charts on all the major indexes, you will see that they are more favorable than not, but they really haven’t made the big move as of yet. For the market to really get a strong move going, it would have to clear the gap it has tried a few times and failed in order to get through at Nasdaq 100 2965. That’s just step one. Above that is the massive gap down from earlier this year that has its top at 3025 and its bottom at 3000. 3000 will be extremely difficult to get through, even if it gets through 2965. It can happen, of course, but the job won’t be easy at all. It’s not even worth talking about breakdown levels here, because we are so far above, it would take a major move lower to get involved with being concerned. The technicals across this market are quite neutral, but again, with a slight slant favorable. It tells you anything goes here and to not get overly involved with anything. Just remember 2965, and only if we blow through that does it become more interesting. Anything else is meaningless noise.
The sentiment issue is worth noting here for a moment. I have watched folks sour on the markets the past few weeks. The bull-bear spread is now down to 11.4% more bulls, which is getting down there when you consider we’re in an agnostic market for now. You’d normally equate that type of reading with a market that has been hit particularly hard over the past few months. That’s just not the case here. A little more selling, or even a flat market, would have us in the single digits on the spread. That’s just not good news for the bears. Go slow, as I mentioned. Things are fine.
Peace,
Jack
