Good morning. Futures are flat on this data/earnings filled groundhog day. Here are the top headlines:
- Strategists abandon bearish views after rally (BL)
- Bernanke to testify on economy and deficit (YF)
- Weekly jobless claims fall 12K (MW)
- Job cuts jump in January (CGC)
- Retailers post mixed results (CNBC)
- Productivity rises 0.7% (MW)
- January auto sales accelerate (WSJ)
- China may become involved in EU rescue (REU)
- Greek PM seeks to force pledges of more austerity (REU)
- ECB may wait for investor deal on Greek swap (BL)
- European regulators consider loosening rules (WSJ)
- Germany wants to restart talks with Iran (REU)
- Tokyo bourse suffers glitch, angers traders (REU)
- Time is running out on payroll tax cut (YF)
- Republicans push to stop automatic spending cuts (REU)
- Qualcomm handily beats Street, shares rise (REU)
- Short squeeze expected on Green Mountain (REU)
- Chipotle 4Q profit grows 24% (MW)
- Sony sees $2.9 billion loss (REU)
- Merck sales fall short, issues flat forecast (REU)
- Deutsche Bank profit tumbles (BL)
- AstraZeneca to cut 7,300 jobs (WSJ)
- Glencore and Xstrata in merger talks (REU)
- Facebook files for historic IPO (REU)
February started off positively with a gap higher open and then some upside follow through up to S&P 1330 before giving up a good portion of those gains by the close. Even amid yesterday’s impressive strength in the morning, the market still struggled to finish out at the day’s highs.
Nevertheless, the gains yesterday put us back within the uptrend channel after closing below it the day before and also invalidated the previous unconfirmed ParSar sell signal. We also continue to trade very close to filling the cup/handle target at S&P 1336 and yesterday we closed again back above the 10/20 day moving averages. In sum, the market continues to be positively resilient, but at the same time shows difficulty with sustaining upward momentum.
At this point the bull camp still has one task left which is to break and hold above those prior highs at S&P 1,333. The reason why this is important is that we still have that bearish head and shoulders pattern to deal with. While it is unconfirmed (again no break of neckline or trade under Monday’s lows) unlike the bullish cup/handle setup, it still is still something we’ll need to see broken. In fact, the more I look at this pattern as it develops this week, I think we’ll need to adjust the necklines and potential downside targets respectively again placing emphasis in holding above Monday’s lows at S&P 1300. A trade above S&P 1333 takes this pattern out of play and the sooner we see that the better.
There’s lots of data and earnings news this morning not to mention Bernanke’s speech where markets will be looking for any hints of increased stimulus. Both seasonal and price action studies suggest that we should have very little trouble breaking above last week’s highs and fill that bullish cup/handle target at S&P 1336, so let’s see how it plays out and whether the market can actually build further upon yesterday’s jumper into the monthly jobs report tomorrow.