Traders,
Just when we thought that it could have been support, the rug is pulled out from under us and the market slips back down and sharply. January has proven to be a month of political concern that has overshadowed the earnings. From a technical side the market is not looking good if it can't hold out at these levels and I would argue that any snap below the support areas could jolt volatility (VIX) higher. We need some future security and clarity that politics and policies will not become the cornerstone disruptor of both the economic landscape and the markets. We seem to be at the end of the recession, but it looks like there is a possibility (however slight, but growing) that we could have a double-dip recession and the second dip will be significantly worse, since it is already on the back of high-unemployment and massive government debt/deficit. We must navigate the waters carefully.
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| Bernanke
2nd chance?
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Bernanke was confirmed (as expected) but by the narrowest of margins. There were several Democrats that were last minute persuaded by Obama to confirm him, but if we look at the process it is probably the most bi-partisan step Congress has taken since Obama has taken office. Many who face the mid-term elections are trying to distance themselves from Bernanke and the Billions of bailouts. Politician's remember how strong their "NO WAR" vote was and if Bernanke fails or the economy gets worse they can stand on a "No Bernanke" vote. Actually you could say voting against Bernanke (going into an election year) is the safer of the two options - from a populist stance. Regardless, he is in - but the vote of 70-30 was the closest in Fed history. Clearly the vote shows the distrust for the institution and the Fed most certainly will have a harder time going back to Congress for expansion of powers and will most certainly face a more crucial eye, just look at the AIG investigation. The good news, the uncertainty as to Bernanke's confirmation is over and the market doesn't like change. The futures are seeing some strength in the pre-market. http://www.bloomberg.com/apps/news?pid=20601087&sid=aqQaGY5WkNWY&pos=7 His confirmation is overshadowing that AIG is tapping it's FED credit line by $2.4 billion. Didn't we just have a hearing yesterday that grilled Geithner and Paulson about AIG and the billions they borrowed and the deals for paying 100 cents on the dollar to Goldman? I think the Fed will also get further sucked into the AIG hole and especially if the AIG story and populism (hatred) for them continues to mount.
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| GDP
stronger than expected! |
The first look at the 4th quarter GDP is stronger than expected at 5.7% and the pre-market futures are loving it. Let me remind everyone (as we do quickly regret) that the first look at the 3rd quarter GDP was stronger than expected at 3.5% , then revised down to 2.8%, then down to 2.2%. Clearly showing the economy went from signs of a recovery last year to one that looked rather weak. But we tend to forget the past and also tend to over look revisions. Just watch revisions to get a clarity... Remember? http://247wallst.com/2009/12/22/commerce-department-gdp-revision-show-q3-was-awful/ For now though, the stronger than expected GDP is sending the futures higher on the back of Bernanke's confirmation. It's a strong one-two punch of confidence this morning. The big injection into the GDP was the change in inventories (which seems to add about 3.39% to the GDP). It was inventory management and not the consumer spending which grew only at 2%, below the previous quarters 2.8%. That is an important factor to look at when measuring growth - again the story remains contracting revenue and cost cutting is boosting margins. That is a little alarming and while the number looks like growth (and is) - we must always remember the HOWs and WHYs. http://www.cnbc.com/id/35141739 |
| Futures Pre-market
Where's the action! |
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The futures are getting a solid jump on the Bernanke confirmation and stronger GDP numbers - the futures are driving the market this morning and expect a higher opening. |
| Support / Resistance
Going higher or lower? |
INDU 10,000 / 10,250 (We broke down yesterday - now we need to get back above 10,250 to reflect any strength. 10,250 is more of a pivot point, rather than a resistance area.)
NDX 1750 / 1800 (It had seemed that 1800 was going to hold and then we just got knocked down hard. Apple seem to already have the iPad news priced in as they say "buy the rumor and sell the news" the stock singly added over -10 points to the NDX)
SPX 1075 / 1100 (We seriously need to get back above the 1100 line to show strength we are edging on a weak support area. Futures are getting a boost in the pre-market.)
RUT 600 (The broader market, while getting hit sharply yesterday, is still above the 600 level and that is a good thing. If it can hold above 600 with some strength it might bring some confidence to the other more volatile indices. |
| Conclusion
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After all the political chaos this month, the confirmation hearing of Bernanke and the GDP numbers is giving some confidence back to the market. Of course the "recession is over" crowd will be waving their flags and cheering over the GDP numbers. Obama and the Democrats will certainly spin this as we are going into the right direction and may help them going into the mid-terms (if they can keep any revisions from taking it down).
Earnings continue to show some strength in the tech sector as AMZN and MSFT both came out rather strong and are helping boost the NDX this morning as they are both over weights. Oil is now seeing strength this morning on the GDP numbers as well. The Dollar is also gaining slightly this morning on the GDP numbers and weakness in Europe with the news looking bleak in Greece and Spain is also helping. Interest rates hardly move on the GDP data - showing that investors are still not confident to come back into the equity markets after they had recently fled the market in January during the sell off over the last couple of weeks. |
