What Will Stop the Rally?
The market rebounded in a strong way last week. Over the past three weeks, I cautioned against going short - it's not because I wasn't bearish or that I am super bullish. I had a long bias because the indices were oversold at strong historical levels of support.
While the indices did not sink lower. I really cannot say that the indices jumped higher until last week. And even now, although I expected another ride to 1197 there isn't much of a chance of a sustainable break out past that. The 1250 resistance will be a beast, and barring any stimulus plan or political intervention (as if those idiots could act fast) there really is not much of a reason for SPX to blast any higher.
Today, SPX looks ready to challenge and overcome 1197 resistance. Last week it tagged 1175 on multiple occasions, and failed. But it consolidated well above 1155, and is now ready to take out 1175.
Once the break out past 1175 occurs, it's imperative the bulls hold 1155. A strong bull would take out 1175 and not look back. But I don't really think we're dealing with a strong bull - and if we are then you know what to look for (hold 1175) then rally past 1235 quickly.
News overseas was active this morning. China increased its reserve requirements, again. The move is done to sate inflation. China has raised reserve requirements to 21.5% and the latest increase will suck $140 billion from the system.
The move from China's government sent Chinese indices down over a percent today. Although the Hong Kong exchange was up a percent, and India rallied 4% today.
Europe is back to finger pointing this morning between political officials, analysts and banks. Things are a mess in Europe, but the European indices are up nearly 2%.
The international optimism spread to the U.S. And the indices should opened just less than 1% higher. Oil and gold initially also responded favorably and were up about a percent after declining in the recent weeks. The bulls will need that enthusiasm the carry them past the 1175 level and towards 1197.
And now that earnings season has calmed down, investors will put more focus on economic numbers. This week the market will be provided with home sales data Monday and Tuesday, and then it's employment stats for the rest of the week. On Wednesday ADP announces private payrolls early in the morning. Thursday will coincide with the usually slew of 400K initial claims and 3700K continuing claims. Then Friday comes the announcement of the "official" government unemployment rate and nonfarm payrolls.
