Technical Bounce on Traders Minds

The economic data this morning has been sobering to say the least. The ADP Employment numbers were worse than expected, -697 vs. -630, and the MBA Mortgage Application data on refinancing has shown exactly what I said it would 4 weeks ago, a huge drop in refinancing because of the spike back up in the 30-year mortgage. I said the banks were only killing themselves by thinking that they could play the bait and switch game with people, hoping to bait them in at 4 5/8 and then switch to 5 3/8 in order to make more money. I said that 4 1/2 was the new 5.....and watching the mortgage apps drop in half in just a few weeks confirms everything I warned.....The Real Estate market will only stabilize near term at 4 1/2, just like I warned it would only stabilize at 5 all the way back in January of 2008 (but Benny pulled the 125bp out of his.....hat.....and killed the long end of the yield curve, just like I warned he was going to do).

Pre-market futures are actually up on the bad news, which means that traders have "oversold" on their minds, and even bad data is not going to change their minds. The mental focus of traders goes right along with what I warned yesterday about a potential pause in the short term downswing. The market is set to gap up a little, and probably try to continue the pause and technical bounce that started yesterday. I'm not in a huge mood for calls, but there are a small, smattering of bullish stocks out there that I may keep an eye on for potential bounces.

Here is a chart of the Dow:
(click on image to enlarge)

The 6,850 area on the Dow is still an intra-day tipping point, and a close above 6,875 would confirm the bounce. A close above 6,900 would confirm a Morning Star/Inverted Hammer combo pattern and open the door for a technical counter move back in to the 7,100 area. So if we get the counter move, the move itself could be as much as 400 points or more on the Dow. If instead the market gaps and fades severely, and drops back down through 6,700, then I will stay in pause mode (and even fade to 6,500 mode) rather than technical bounce mode.