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The technical action in the market appears to leave hope for at least a short term bounce from an extremely oversold condition. While this could be as short as a few days, the extent of short covering combined with some sidelined money moving into the stock market could cause the bounce to be significant. While entertaining, the President’s speech last night failed to cause a significant reaction in the market from either the bulls or the bears. The more optimistic view on the ability to recover was seen as positive, but the lack of details left the market reaction muted. Statements from Bernanke, however, sparked a major turn higher in the US and world stock markets yesterday, with at least some sentiment that the US is not on the path of nationalizing banks. Strength in auto stocks and hints that China may even double the stimulus plans helped to keep markets firm overnight. Bernanke will be speaking in Washington again today. The longer term problems due to uncertainty in the financial outlook on the economy and on corporate profits and the uncertainty in the political outlook, as the Administration has not been very specific regarding the public involvement in the banking, mortgage and insurance business, may be seen as limiting factors on any bounce. The market’s oversold condition enabled equities to shrug off more bad economic news yesterday, including a record low in consumer sentiment and warnings by Bernanke that a severe economic contraction may not end this year. But the rally in equities gained strength later in the session after Bernanke’s testimony seemed to calm investors’ jitters over the banking system. Bernanke’s made assurances that the Fed didn’t need to nationalize US banks to make them viable. Other calming talk from the FDIC chairman, declaring that all large banks are fine for now, also underpinned equity prices.

S&P 500: The market faces existing family home sales data today, and there is a more upbeat sentiment after the strong gains yesterday. Short covering alone could give us a significant bounce, but the poor outlook for profits and the lack of conviction that the economy will turn higher anytime soon may be back to haunt the market. Talk of reducing the deficit in a matter of years after just passing bills of more than 1 trillion dollars adds more confusion. Watch for bounce for a few days but not much more.

DOW: The market is attempting to bounce from an oversold technical condition, but it is not just the charts which are oversold, as consumer confidence readings dove to a new all-time low in February to 25 from a downward revision of 37.4 on January. The Dow gained 3.32% yesterday, and March futures managed a new low for the move and a higher close. Look for the bounce to last a few days and not a lot more.

NASDAQ: The market appears set to see some type of a bounce, as medical and high-tech companies may fare well in the new economy. Japanese stocks jumped 2.7% overnight after a massive 3-day skid. On the break to new lows for stock markets across the globe, there was not a significant panic of collapse, as some stocks, especially non-financial ones held well above their November lows on this break, which is somewhat of a positive signal.

This content originated from – The Hightower Report.