Economic Reports Due out (Times are EST): International Trade (8:30am), Consumer Sentiment (9:55am), Bernanke Speaks (12:30am), Treasury Budget (2pm)

Premarket Update (Updated 9am eastern):

  • US Futures are down around -1% heading into the open.
  • Asian markets were down on average about -0.8%
  • European markets saw losses range from -0.8 down to -1.6%

Technical Outlook (S&P):

  • We are seeing the first signs of heavy selling in about 2 weeks. The ability to hold those losses looms as the bigger challenge for the bears, as recent history shows otherwise.
  • Holding at least the current weakness into the close would push the indices into negative territory for the week, and the first time in six weeks.
  • I think it is very possible we see a gap fill today from last Friday’s huge gap-up.
  • Short-term support lies around 1326. 
  • Volume has remained relatively steady the last three trading sessions.
  • S&P and Nasdaq continue a slow melt up, as the intraday dips consistently get bought up. Russell is showing some very nice consolidation at current price levels

  • The S&P is well overbought now on the daily, weekly, and monthly charts.

  • Any major rally at this point will allow us to challenge the 5/2 Bin Laden Recovery highs at 1370.
  • Trend-line support is at 1300 off of the 11/28 lows. 

My Opinions:

  • I doubt that the selling that we are seeing right now will lead to a significant sell-off, or anything close to what we saw during August/September of last year.
  • Careful with piling on short positions at the open after seeing some weakness. Very easy to get burned today, if the bulls buy this dip.
  • While recognizing a lot of head winds facing the market from an economic standpoint, the market seems to be pricing everything that we know and expect about the European crisis, and with a solid earnings season as well as easing by the Fed, we could see continued price appreciation this year (particularly with an incumbent President up for re-election).
  • The daily price action, beyond the obvious ‘buy-the-dip” action has been to breakout and move higher, followed by a few days of consolidation and slight pullback. Rinse and repeat.
  • Sideways trading over the next few days wouldn’t surprise me in the least bit here, even over the next week or so. In fact, it would be considered healthy for the markets to do so. 
  • We have yet to see the “buy-the-dip” mentality cease. Each market open where weakness is present, the bulls buy the open, no matter what, and recovers most if not all of the day’s losses. As long as this persists, the bears do not stand a chance, and the bull rally will prevail.