Good morning. Futures are under significant sell pressure following weakness in both Asia and Europe as a Greek deal remains elusive. Here are the headlines:
- Greek deal limbo weighs (YF)
- Greeks strike (REU)
- China’s imports plummet (BL)
- IEA cuts oil demand outlook (REU)
- Global accounting reform ups pressure on U.S. (REU)
- Settlement lifts hopes for housing recovery (WSJ)
- Fed plays favorites in secret deals (BL)
- Bachus faces insider-trading investigation (WP)
- NRC approves first new nuclear plant (REU)
- Criminal probe trail going cold at MF Global (REU)
- LinkedIn upbeat for 2012 (REU)
- Alcatel sees higher margins (BL)
- P&G to terminate Pringles sale (BL)
- Apple iPad3 whispers (REU)
Like so many days before it, yesterday we saw an early attempt to push the market lower after a positive start but the market pulled another Molly Brown as we once again rallied back from the morning’s lows to close out with another day of small gains. As we’ve seen before, buy the dip programs were lying in wait for any trade back to the 5 day moving average.
While another day of gains is an impressive accomplishment in addition to seeing further upside following through upon last Friday’s jobs report rally, the price action and seasonal studies are triggering some very large sell signals as this week ends.
First, yesterday’s rally from the lows was the first time we’ve failed to hit our measure move reversal target on an intraday basis. When this has happened previously, it has served as a reliable early warning indication that the rally is coming to an end and risk is increased for a swing reversal. In addition, the rally in the VIX (indicating hedging type trading) suggests that a pullback of some size now awaits us. All we need now is for price to confirm these very bearish indications by seeing some significant downside follow through upon these early sell efforts which have seen reversals every single day this week.
With premarket futures suggesting another strong sell effort at the open, we’ll soon see if the market can withstand yet another sell effort. A couple of downside levels I’ll be watching this morning include this week’s lows at S&P 1,335 and also the neckline at S&P 1,330. If both break, that would provide some price indication that these bearish studies are valid especially if we close under both at week’s end.