Market Hammers Out a Bounce

Earnings Season continues to roll along with more big name companies reporting. Many companies are reporting in-line or slightly better than expected earnings. Wall Street is most concerned with forward guidance, and so far, in general, the earnings outlook for many companies has not been ugly. The fact that earnings have not been catastrophic has not stopped traders from being nervous about the Financial sector mess, and the assumption is that eventually the mess will slow the economy enough that earnings in January will start to reflect the general slowing conditions.

The LIBOR, or rate that Banks charge for short term loans has come down for the fourth straight day pre-market. The huge spike in the price of short term money was bound to eventually settle down, which is good news for the market.

Oil has dropped all the way into the way into the $74 area, which is tremendously good news for the economy despite that fact that we got here on a recession instead of an increase in supply. The big drop won't last in the long run unless the U.S. increases supply, however, the drop in the price of gas will probably increase discretionary spending, decrease travel costs, and drop the rate of inflation - which was indicated with a better than expected CPI this morning.

Pre-market futures were trading down until the better than expected CPI report came out, and also (and especially) the Weekly Jobless Claims report came out better than expected. Any steadying of the employment situation, along with a drop in gas prices, is a welcome sign for bulls.

Yesterday I wrote that short term support on the market (SPX) was the 960 - 965 area and that if the market dropped through 940 then we would potentially see a round trip back to 900. Well, the market dropped through 940 and within a couple of hours we dropped all the way to 907.....As you can see, the 900 area is the next support, and a breach of that area could drop the SPX to 850. It looks like the market will pause and bounce a little this morning, but keep an eye on the 907 area, if we drop below that then we are most likely headed down to 900, and then the critical battle will be on between the bulls and the bears.