Good morning. Futures are positive following gains in Europe and ahead of a lot of economic data and Fedspeak. Here are the headlines:
- Jobless claims fall 2K (MW)
- Personal income and spending rises (MW)
- Retailers report strong February sales (CNBC)
- Small businesses borrow more (REU)
- Gold bounces after rout (REU)
- Oil concerns continue on Iran risk (BL)
- Eurozone data disappoints (WSJ)
- European markets see post-ECB cash boost (REU)
- Euro ministers set to clear Greek rescue plan (BL)
- Monti expects euro debt firewall this month (BL)
- Spain clears another debt auction hurdle (YF)
- Japan sees big capital spending jump (BL)
- China manufacturing surveys rise (MW)
- China slashes dollar reserves (WSJ)
- Bernanke quells talk of fresh stimulus (BL)
- Fed’s Fisher wants big bank breakup (CNBC)
- SEC spends millions on consultants (REU)
- Companies asked to reveal political spending (CFO)
Wednesday had potential to be an interesting day for this week and we were not left disappointed. While we started off the day in positive territory following the LTRO announcement and better than expected GDP, after 10AM the market’s advance was put to a halt.
Through we did not need any excuse whatsoever for seeing an end of month, leap day profit-taking pullback, the blame for the reversal from the fresh highs was placed firmly upon Bernanke shoulders and the subsequent roil in the futures markets. Whatever the reason might have been, we saw a decent attempt at a pullback after setting new highs.
From a technical perspective, the reversal was noteworthy because it thwarted the bullish cup/handle setup triggered on Tuesday and substituted a potentially bearish head and shoulders setup in its place. While the new setup is unconfirmed as we still need to see a neckline break, it nevertheless provides a brief window of opportunity for the bears to at least show they have some say. More importantly, if they are able to do so convincingly, it is possible we’ve seen a trapped bull type reversal as I discussed in last weekend’s chart show. But, once again it is always the subsequent follow through or lack thereof which is so important following days like yesterday. In essence, we’ve seen days like yesterday before only to see the market to rally back just as quickly.
Standing in the way as obstacles for the bear camp include a positive jumper trade both today and tomorrow. While March’s jumper historically hasn’t been the most lucrative for the bulls, following yesterday’s pullback that trade still has some potential. Beyond that it is still possible that Bernanke will say something to encourage the herd in his speech this morning and there is a lot of fresh data to review not to mention a ton of Fedspeak today.
So, as March begins, let’s see if the bears can take advantage of the setup and halt the ascent to new highs or whether they squander yet another opportunity to do so. As always, I’ll be updating my notebook to help.