Traders,
We had a good break away move yesterday up to resistance areas, the question do we push through today? We could intra-day - just make sure to watch the close. The Job numbers come out this Friday and we are already getting warnings from some that the number could come in worse than expected because of the recent bad weather - thus setting us up for a bad number. It looks like we may still be climbing the "wall of worry" - no doubt we really want to move higher. Right now we are discounting the job numbers with hope that they will turn positive in March. |
| Sovereign Risk
the driver of volatility. |
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We should get better resolution as to what the EU will do with the Greece debt issue. The problem is that this is not a one off problem, with Spain, Portugal, Italy, and others also facing similar issues. The EU (and aiding countries) will have to be careful and construct a plan that will be punitive to warn others this is NOT the path that the EU wants to take. It is difficult to construct such a plan, on one hand any aid that is given to Greece will "float" them for a few months to year - but it may not solve the deficit problem - that has to come from Greece. It becomes a carrot offering - trying to get Greece to manage its books. On the other hand, such aid may be requested by other nations in similar positions. Germany no doubt will be the core of any aid, with a few others pitching in. There was an interesting question by Ron Paul to Bernanke in his testimony last week. The FED does have the power to lend money to Greece - the question is WILL they? Bernanke "assured" us that he will not be lending money, but how much reaches Greece through back-door channels is another question. We saw how that played out with AIG and TARP back to many European Banks. This year will most likely be driven by volatility that surfaces from sovereign risk. PIMCO's El-Erian (CEO), sees this to be the key issue of the year. We have already seen volatility surface from Dubai and Greece, who is next and when / where will it come from? http://www.cnbc.com/id/35658361 (El_Erian's outlook) http://www.cnbc.com/id/35657492 (US Monitors Bank's exposure to Sovereign Risk) |
| Staples
expects slow growth. |
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Staples reports lower than expected quarterly profit and the full-year forecast is well below estimates. Even with a expectation of a modest recovery in 2010, Staples (the largest office products retailer) is expect to see full-year earnings at $1.23 to $1.33, analyst were expecting $1.40 per share.
They are expected to see a slight increase in growth in the coming quarters (in the mid-single digit). There competition (Office Depot and Office Max) had reported slightly better-than-expected earnings, but are also rather conservative in their estimates. All expecting domestic growth to be in the low-to-mid single digits.
Staples stock is off this morning in the pre-market (-1.60). Expect a little pressure in the sector this morning. |
| Futures Pre-market
Where's the action! |
The futures are up in the pre-market, looking like a good opening follow-through from yesterday.
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| Support / Resistance
Going higher or lower? |
BREAK OUT? Not yet - we are right there - so keep a close eye on it.
INDU 10,250 / 10,500 (The 10,500 area is the big break-out area. We are still short of that number, but no doubt we could visit that today. The question - will we breakout?)
NDX 1825 / 1850 (We are also just short of the 1850 area and we look like we will open right at the 1850 area. This is a key resistance/break-out area. Watch that area closely.)
SPX 1115 (Yesterday I said to watch that 1115 area - that is the key resistance area - we closed right there. Watch for a break-out or retracement. Watch the close!)
RUT 650 (The broader index broke-out yesterday - that is a good sign that could pull up the other indices. Watch that 650 area - we could be testing that level.)
Today is a test to break-out or visit resistance - the close will determine that. The market wants to move higher, but we are going to be getting those Feb Unemployment Numbers, which could come in higher than expected (because of weather). Expect some volatility this week. This is a key area - break/out or retracement. Big Gamma area!
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| Conclusion
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The economic data has not been that great and we have dodged a few bullets (primarily coming out of Europe) - for now. However, we seem to be climbing that wall of worry again. Bernanke (the Fed) are keeping their foot firmly down on the accelerator and any slight raise in the Discount Window was only window dressing - they (for now) don't plan on hiking rates. The risk trade is coming back into play.
The employment report for February could knock some wind out of the sails, however - many are already expecting that and even the government has been issuing warnings that February numbers could be worse than expected. Many are expecting that if that is the case, it is an anomaly, and March will be a big turnaround month. Thus - climbing the wall of worry and hoping that March will vindicate any move higher - with positive job growth.
Expect to see volatility come into play. | |
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| Author |
| Michael Williams has 20 years experience as a institututional floor broker and options market maker. He is a partner in both Silexx Financial Systems (a trading software company) and Kinetic Strategic Group (a private investment firm). He co-authored the book "Fundamentals of the Options Market" a McGraw-Hill text and has lectured throughout the country on Options, Risk Management, and Volatility. | |
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