Modest Bounce and 7 Things to Consider for Tomorrow

All of the major indexes bounced off their respective lows today and found some buyers. While the move lacked any conviction it did stop the selling at least for the day. There was no real positive stimulus for traders or investors to hang their hats on as the Durable Goods orders were down 4.3% versus up 1.6% as expected. Auto, defense and aircraft all were lower than expected. The futures reacted prior to the open, but manage to move past the disappointing news. Consumer confidence was higher at 80.7 versus 77.1 expected. That helped keep the positive open moving higher and the Case-Shiller home price showed growth of 13.7% for the year as expected. Apple was a drag on the NASDAQ, but even that index managed to fight into positive territory. We will take what the market gives and look for tomorrow to add further clarity on direction near term.

With all that in mind what did we learn today that was worthy of our attention?

  1. S&P 500 index held support at 1775 and bounced. Lower volume on the buying than the selling for starters and an inside day technically to watch in tomorrows trading. How it trades tomorrow will some indication of direction near term. The need to hold the technical support at this level was obvious looking at a chart and thus to some extent, it became a self-fulfilling prophecy. I will state again that the significance of this level is purely technical and we will continue to watch how the market reacts going forward.
  2. The NASDAQ index closed at the 4075 support level on Monday and held the 50 DMA and the November 2012 trendline today. The technology sector failed to hold, thanks to Apple on the downside today. Semiconductors tested support as well and held again with no gain. Overall the index is attempting to hold this level of support, but it is being challenged by the large cap stocks. Watch and be patient for now.
  3. Russell 2000 Small Cap index held 1120 support and moved back to the 1135 mark. The test also touched the trendline off the November 2012 low which is the current long term uptrend line in play and holding for now. This index will be key going forward as it is the first to test the longer term up trendline.
  4. Europe (IEV) bounced 1% on the day and back above the 50 DMA. Like the US markets the support levels are broken and tested short term. Looking for a move back above $46.52 and to hold the uptrend currently.
  5. The FOMC meeting started today and with the expectation of more stimulus cuts on the way tomorrow. Another $10 billion is the goal. If it is more the markets will react, if they don’t cut… likely sends a negative sign about the economy and that could get stocks selling. Expecting not surprises from the Fed at this point. As we discussed yesterday inflation versus deflation is still a issue to consider relative to the Fed, interest rates and commodity prices.
  6. State of Union Address tonight? Unless there is something totally unexpected it will be a non-event. Earnings are a bigger concern than what the President will state about fairness and the unemploeyment picture.
  7. Food for thought… with most indexes and sectors attempting to bounce off the lows from Monday, is it a dead cat bounce (no offense intended to cats), or a upside renewal? Watch the bias as it still is pointing to the downside currently. Inside trading day technically for most key indexes and tomorrow will likely settle the issue up or down for now.

Plenty to digest in terms of concerns about the markets looking forward. The greatest challenge we all face every day is having the patience to let it unfold and gain clarity. Tomorrow is another day with plenty of information and clues on how to put the puzzle together, one piece at a time.