Quiet Before The Storm....
That would describe today and mostly likely tomorrow as well. We are awaiting lots and lots of huge economic news this week, not to mention a huge statement from the Mr. Bernanke on Wednesday. The bulls and bears are both scared to overdo their stance as the news this week is going to be huge in terms of market movement. Wednesday kicks things off with the ISM Manufacturing number thirty minutes into the trading day. A few hours later we get the much anticipated Fed statement, with the market expecting some type of stimulus for the economy. If it gets nothing, look out below.
He has more than hinted that he will likely do something at this meeting to stimulate, thus, it would be a major disappointment for the markets, if he came away doing nothing at all. He has a lot of pressure on him this Wednesday to appease the market. He knows that if he does nothing at all, the market will be very unhappy. He doesn't want that, so expect something to be put into place, even if it's not a full QE program. The bulls and bears are on cruise control until Wednesday, thus, today’s action wasn't meaningful. After Wednesday, we deal with the European Central Bank (ECB) on Thursday, which is the equivalent to our Fed from Wednesday. To top it all off, we get the Jobs Report on Friday. Get ready folks. One amazingly wild week is upon us, and only one trading day away from the start of the action.
The earnings season has been extremely interesting in that it hasn't been as bad as expected by most of the so-called experts. There was supposed to be a lot more warnings, with many stocks getting pummeled, which, of course, would have led to the expected heavier selling that has never taken place. Quite a few stocks have been hammered lower, but more have had a good report, which it allowed the stocks to go appreciably higher. The evidence of an agnostic market in place as each company is standing on its own merits. If you report well you get rewarded, but if you warn, and more importantly, guide lower, you are in big trouble. The earnings season has in many ways saved the market. Yes, the bar has been set lower, but the selling prior to the earnings report was based on those lowered expectations.
If a company can then do better than what was built in, it rides the escalator higher. Over time the bar will be set higher, and these companies will need the economy to hold up to get to those loftier numbers, but, for now, the news has been better than expected overall. It seems only a total collapse of the financial system will once again be the catalyst for something very bad to happen to our market. That would be created from the situation in Europe, but the ECB is busy doing what our Fed is promising to do. Who knows how it all ends, but, for now, the ECB, and our fed, are preventing the collapse many fear. So our market continues to hold up overall. Back and forth to nowhere, mostly, but hold up for sure.
There is the headache gap at 2965 for the Nasdaq 100, but bigger picture, if we can get through that level, the Nasdaq 100 needs to clear a huge nasty gap down that runs from 3000 up to 3025. The bottom of the gap at 3000 will be an initial wall for the market, if we can ever get that high. Nothing will be easy as the whipsaw market continues. It's seemingly never as good as it looks when it's running higher, and never as bad as it looks when it's running lower.
It will fool you every time you think you see a trend starting to take shape. News comes out to reverse it for a few days, and then the game gets played all over again. It's best to keep things very light unless you love to gamble. If you want to take a shot, short heavily, or go long heavily on the news coming up this Wednesday, if you think you have a grasp on what's coming. I have no clue what's coming, thus, my best advice is to avoid being too heavily involved. Things will clear up nicely by Friday's opening.