Pushing up into those big resistance number 8k INDU, 1300 NDX, 450 RUT – The big news that seemed to fuel the market was the lax accounting rules (which should boost financial companies earnings) and lots was made of the $1 trillion injected into the IMF (another backdoor loan/bailout). The IMF allowed the EU to pseudo participate in more stimulus – which they wanted to avoid and also make the U.S. happy that stimulus is coming from somewhere.
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Jobless Claims
Big losses are in line with expectations - down 663,000 – with unemployment jumping 8.534% - a large jump and revisions in January showed more jobs were lost. Futures are seeing some hyper volatility after the number. It is a huge jump – even though it IS expected. Economist expect the jobless to continue to expand for another 1 to 2 quarters before the bottom is found – one indicator is the announcement of more layoffs. Many eyes are also on the Auto industry and the possible fall out of Chrysler and if GM goes into bankruptcy and has to restructure.
Futures initially jerked up as Treasuries fell? Go figure….spin is that this was the worse and it can only get better.
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RIMM RIPS
RIMM rips to the upside in aftermarket trading – as the marker of the BlackBerry reported earnings that exceeded expectations. Not to mention they have one of the best defacto-spokesman, Obama. Stock is up $11 in the pre-market.
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Dollar & Commodities & Rates
The USD showed continued weakness yesterday – with the 25bps cut by the ECB and the pressure that foreign nations brought to the G20 meeting about extended spending and inflation concerns. Additionally – we saw treasuries decline sending the yield higher on the 10 year – not exactly what Bernanke wants to see – especially with his quantitative easing and the need to finance the deficit (which is already falling short).Interesting that Gold and Silver did not see the kind of volatility or upward move that the foreign currencies saw against the dollar, but we did see Oil make a huge move to the upside breaking well above the 50 level - after its recent pull back.
The market is certainly getting a boost – and money flow out of treasuries and into the market is a big help – additionally the massive decrease in short-interest is showing that covering has increased recently.
Is that dollar getting toppy in the short-term – well the Euro at 135 is seeing resistance and gold is still holding above 900. And even though that oil did dip below 50 on the recent pull back it is back up to previous recent highs. It is a testing area for sure – in the short-term. Toppy equities on a weak dollar and rallying yields – not exactly putting a smile on the Fed or Treasuries face.
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Futures Pre-market
The futures are getting a slight pop after the jobless numbers (coming in as expected) but are now coming back off. The spreads are in – so expect the contraction to fair value come for the short-future side after the news was released. RIMM however does need to be added in to the spread – not an overweight but it does shrink the pre-market spread on the ARB. If the spread remains into the opening – expect some buy pressure at the opening – but as I type the spread is shrinking. Could be mixed at the opening.
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Support / Resistance
It was only 3 weeks ago that we were seriously testing some support levels in the INDU at 6500 and the NDX breaking 1100 and testing 1050. Now we are quickly at the other end of the scale. Not that I have been in the market as long as others – but in my aprox. 20 years – I have not seen as much fear selling turn into optimistic buying in such a short period of time….
INDU 8000! (That’s it the big number – can we close above it and strong to turn this resistance into a support? Who knows – watch the close. It is resistance level – that means one should flatten long positions.)
NDX 1300! (That is also the big resistance number – again close above? RIMM is helping with its big gap up. Watch the close.)
SPX 835 (850) (I know the talk is 835 – but I am just rounding up to 850. Again – the big number.)
RUT 450 ! (Here again we are seeing the big resistance!)
Now even if we do close above them – to confirm support in my book it must stay above them for more than just one close and we need to see more than just a little bit of volume above the number. However, if they do break resistance and they will turn into supports. It’s a numbers and volume game at this point. Probably the best to be flat deltas and long gamma. I have a sneaky suspicion that our rally was too fast and too quick and we may see some selling at the resistance levels.
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Conclusion
Wow – the rally has been huge and for those that participated if you didn’t flatten your longs, close out, or take profits – this was the time to do so. 8000 in the INDU, 1300 in the NDX, 450 in the RUT are great moves up and we (long investors) should be MORE than happy. The greatest advice at this point – don’t look a gift horse in the mouth and take your money off the table. It is once every 20 years that you get a 20-25% rally in a month.
Jobless numbers are at puke levels – even if that is what we expect. I think we still have a ways to go to find a bottom in the market and the new accounting rules will make it that more harder to find the bottom.
Stay frosty!
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