Watch This Price Carefully
The market began with a huge burst higher yesterday. But as we have seen all week, the morning move reversed by the afternoon.
Each major U.S. index ramped 0.5% at the open, but selling pressure almost immediately followed. Volume was also high during the bearish retreat.
Yesterday I mentioned how 1332 was going to be resistance and how nearly every other U.S. index was less than one percent away from a similar sell zone.
The bears were able to protect those resistance zones yesterday. And the increased volume during the session strengthens the case that the bears will be unlikely to lose those zones without a major bullish catalyst.
Going into the week I expected consolidation to occur in the market in the form of a broad pullback. The buying pressure within the market has slowed this week, yet most indices are higher than they were one week ago.
I continue to think the market needs to retreat by 3-4% briefly, but time is running out for the bears.
Additionally, both corporate and economic data this week, until this morning, have been bullish, which is supportive of a positive market.
A weaker than anticipated for the fourth quarter was announced this morning. Growth in the U.S. GDP was expected to be 3.2%, which would have been an impressive improvement over the reported 1.8% during the third quarter. The official results, however, were shy of analyst expectations at 2.8%, though consumer spending did increase 2% compared to 1.7% during the third quarter.
I think the biggest take away from the official report was that inflation, measured by the PCE index, came down to 0.7% during the fourth quarter. Any economic slowdown will be met with QE3 so long as inflation does not perk up.
The underwhelming GDP report today is not likely to impact the market. But it certainly won't help the bulls either; I expect a boring session.
