European Optimism Leads Bulls Higher
The market was slammed yet another time yesterday. Although unlike Thursday and Friday, the indices recovered into the close.
Once again financials led the charge lower and the big banks like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) were down 3%. Energy and technology components were also hurt and stocks like Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) were down 1% and Exxon Mobil (NYSE:XOM), Apache (NYSE:APA), Continental Resources (NYSE:CLR), which we're short, and Halliburton (NYSE:HAL) were down 2%.
Despite the decline at the open, the indices staged a rebound after a positive ISM number was announced at 10:00. But the rebound could not get the indices back positive, and SPX was not able to hold 1175 support. The bulls really need to take that zone back today. The 1175 area is an important zone, and whoever (bear/bull) controls it, also controls the near term trend.
For once, the bulls have positive headlines working for them this morning. Europe has mounted a big recovery after the Germans decided to pay Greece. Although the German constitutional court mandated that parliament vote on any future bailout package.
Past Germany and into the land down under, Australia reported 1.4% GDP growth. Tomorrow Japan will also announced GDP for the second quarter. The Asian indices were mostly higher by 2% and the European indices flirt with 3% gains this morning.
The economic news is abundant this week, but most focus will go to the Obama job plan set to be announced tomorrow. Initial reports reveal that the plan is expected to be $300 billion and go towards infrastructure and government spending. The plan is also expected to be tax neutral, and will be funded without any tax increase.
Today, amidst the bullish headlines, buyers need to take back 1175. I already have my doubts about the bulls since they managed to lose 7.5% in three days (bull trends usually don't start that way).
But I am willing to give the bulls a bias (trading) if they can take back 1175 today, and keep it. A successful capture of 1175 should result in another push back to 1220 resistance, maybe slightly higher.
Let's also watch gold. As mentioned to TradeMaster members I went short gold last week. Gold jacked higher yesterday because it was believed that the weakening of the Franc would leave gold as the only "safe" asset available.
Considering today's 4% decline in the yellow metal, that opinion is false and things could get ugly fast for gold bugs.
