Wednesday, March 11, 2009

Morning Update/ Market Thread 3/11

Good Morning,

Futures are up this morning with really no resistance to stop the ascent until we reach the gap up at the 734 area.

The oscillators are overbought all the way up to 60 minutes, so I would expect at least some pullback at some point today. The depth of that pullback will be important in judging the strength of the rally. Bear market rallies usually end when the volume dries up. As Doc would say, volume is like their ammo. One thing I’ve noticed is that the bulls have been running out of ammo more quickly on each rung of the ladder as we fall.

I believe that as we attempt to rally the equity markets you will begin to see more stress on the debt markets. I have an article on that and will post in a while.

The economic data has been very light this week and there’s really not anything significant the rest of the week. Later today the Treasury budget is released and we did get MBA Mortgage purchase applications which were higher but still weak:
The purchase index rose 7.1 percent to 253.3, an improvement but a still very weak level, while the refinancing index jumped 13.3 percent to a 3,470.7 level that indicates solid activity. Rising levels of refinancing suggests that more homeowners are rolling unfavorable loans into ones they can afford, a good sign for the housing sector that will help limit both supply on the market and further contraction in home prices. Mortgage rates really fell in the week with 30-year fixed loans averaging 4.96 percent, down 18 basis points from the prior week.
After strengthening yesterday, the dollar fell back down this morning as did bonds.

I think we are very likely to at least fill that gap up to 734ish. After 734, the next higher pivot is at 768, but there is volume resistance around 750 as well. Let’s watch the new channel, the volume, and the sentiment. People are talking about too much bearishness, but my measures of sentiment show that there is probably too much bullishness.

Of the last 7 of these 5%+ rally days in this bear market, 5 have not had follow through the next day. We’ll see what today brings, it will be important in that regard. We have seen 3 waves off the 666 (unbelievable that held) bottom, so the question is was it an abc or is it a 5 wave advance? No way to know, so we’ll just have to observe and see. If it’s going to be 5 waves, I would expect a mild pullback, but would expect the next pullback to be more sharp if this was just an abc.

Best to your day,


Led Zeppelin - Bring It On Home:
Bring It On Home - Led Zeppelin