With apologies to Thin Lizzy…
During the "monumental" day and a half correction the comment I wrote in two posts was the nature of the rebound/buying would be something to take note of. On that front, you can only applaud the bulls. Not only did they return to the market quickly they have engineered back to back gap ups and as I type the S&P 500 is hovering right near the highs before the FOMC minutes were released last Wednesday.
With that we now had a very similar pattern to the early Feb (one day) of sharp selling which was immediately reversed – only this time it was 2 sessions down and 2 sessions to recapture those losses, rather than 1 day. This despite a growing number of divergences (RSI not as strong as the previous highs, safety sectors such as consumers staples and utilities taking the reign from the "right sectors" a week ago, far fewer new highs being made, etc). If this upper 1520s level is broken to the upside it will also signal that the inverse head and shoulders target of mid 1510s to mid 1520s was null and void. As an aside Tom DeMark's call for the market to top weeks ago and quite a few % lower obviously was way off the mark.
While bad news mattered a bit last week, it's back to hear no evil – see no evil. The U.K. credit rating was downgraded late Friday (ignore it – it was Friday, it's a new week), China flash PMI came in substantially lower month over month (ignore it – Lunar Holiday messes with the data), and the sequester looks firmly in the books (ignore it – just ignore it). Japan is set to head the "right" type of person to the Bank of Japan (Kuroda), and all our Fed officials assured us Friday that all remains steady. Interesting stuff to say the least.
This week will be highlighted by
economic data Bernanke assuring us he is with us during his two days of Congressional testimony. Whatever downside blips may occur (for hours at most) might occur during the following data points:
- New Home Sales Tuesday 10 AM, expectations 381K
- Durable goods Wednesday 8:30 AM, expectation 4.0% drop
- Chicago PMI Thursday 9:45 AM, expectation of a decrease to 55.0 from 55.6
- ISM Manufacturing Friday 10 AM, expectation of a decline from 53.1 to 52.8
You might notice that a lot of these data points have expectations built in for slowing – but other than that small window last week, that sort of thing has not mattered.
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