After the worst week since June, U.S. markets were prone for a dead cat bounce somewhere along the way. This morning the S&P 500 is gapping up (people are saying it is due to data from China but the rally in futures began when an EU member said Spain is open to a bailout overnight), but gap ups were the case almost every session last week believe it or not. Of course all those rallies were sold off, burning anyone who adding to positions, anticipating the start of "the bounce".The trend of the market has definitely had a change in character the past two weeks. The NASDAQ and Russell 2000 are in 5% type of corrections while the S&P 500 was around 3%. None of these are earth shattering pullbacks, but the chart structure of the NASDAQ is especially troubling right now as a potential head and shoulders is being created. More problematic is a host of individual charts which broke down – especially last week. And especially in former leaders. Dead cat bounces from violent swings down are not the type of movements that tend to hold. So with today's gap up the question is does this move hold and if so how far can it go?
Economic data should continue to take a back seat to earnings reports as a host of the biggest S&P 500 components report this week. Some key names:
- Tuesday: Goldman Sachs (GS), Intel (INTC), IBM (IBM), CSX (CSX)
- Wednesday: Bank of America (BAC), Halliburton (HAL), American Express (AXP), Ebay (EBAY)
- Thursday: Google (GOOG), Microsoft (MSFT)
- Friday: General Electric (GE), Honeywell (HON), Schlumberger (SLB)
As for economic data:
- Monday: Retail sales (just released at +1.1%)
- Tuesday: Consumer Prices
- Wednesday: Housing Starts
- Thursday: Philly Fed
- Friday: Existing Home Sales
With just about every central banker move exploited (aside from something new out of China), the next "big" move is the highly anticipated Spanish request for bailout. We saw markets gap up once last week on the news, and again this morning – much like Greece we can see markets gap up on the same rumor countless times. Again everyone knows they will ask, it is just about the timing so why the market always gets giddy over it, is a grand psychological question.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog