More Earnings but Little Excitement

Earnings reports continue to come piling in to the market, but for all the data, there is very little movement. Pre-market futures are up slightly, but well below the area of concentrated selling yesterday.

If the SPY (market) pushes back towards the 86.00, and the pre-market futures are indicating more like 84.75 so 86.00 is still a long ways off, then expect the same selling as yesterday.

Traders look like they want to digest for a little while. The knee-jerk reaction by some fundies has been calmed down a bit this morning, and the market appears to be much more contemplative over the vast amount of data it is currently having to process.

Look for the contemplation and consolidation to continue, and then throughout the day a general consensus start to form. It doesn't appear that the Bulls have a lot of traction to spin their wheels yet. That could build throughout the morning, but right now their are few signs of enough bullishness to push the market back to the recent highs. If the market decides it's finally time to consolidate the trend, then look for the 82.50 - 83.00 area on the SPY as a first support area.

2:45 pm MT: Market Wrap: It doesn't look like I missed much today. I have two general thoughts on the day, and one overall thought on the daily charts. The two thoughts on the day are: One, the Dow seems to be driving support lately right in the 7,800 area (7,750 - 7,800). And two, the market was headed for another selling day until the last 20 minutes when somebody or somebodies put a quick bid under price to get it back into the green.

The overall thought is that the Dow is forming a small, flat Rectangle that will either be a Rounding Top reversal if it breaks below 7,700 or a Rectangle continuation if it breaks above 8,200. With enough traders reading out of the old business cycle playbook of buy the market on low interest rates because 6m - 9m after the lows in rates we will get the next bull market, there is a decent probability that the move is to the upside. It only adds fuel to the fire that we have some government leadership that will say anything at any time in order to prop up the markets. The longer the Dow stays in the Rectangle and holds the 7,800 area, the more likely the trend continues instead of retracing. I am growing more and more of the mindset that the only thing that will bring economic reality to the markets over the long term is an implosion so huge that even government leaders won't be able to spin the news as positive. I don't want an implosion. So I'm guessing/hoping that if we don't get a healthy consolidation of the trend right now, at least I want the consolidation to flatten in a Rectangle long enough for the economy to prove that it's back on track. I'm still concerned that the lack of energy policy, the higher taxes on small business owners (higher tax bracket individuals), higher corporate and capital gains taxes (on the horizon), and the socialization of key economic sectors (financial, healthcare, auto) will not lead to a new, long-term, strong bull market. We may see some fits and starts, and some trending here and there, but it starting to feel more like the 1970's than the 1980's. In other words, I want to be at the beginning of a long bullish cycle for the next 5-10 years, but we may be in the earlier stages of a long flat cylcle of at least several years.

For now, the Rectangle on the Dow is the defining price action, and the best clue to the next move, despite the fact that the SPX is getting more attention because of financials. I speculate that the Dow is being treated as more of a "business cycle barometer" right now, and the SPX is being treated as more of a "financial sector as it relates to the rest of the economy barometer."

So whatever the belief structure of the sum total of fundies is (right or wrong) about the business cycle, interst rate cycle, and economic recovery, it's probably getting reflected a little better in the Dow - and with a little less volatility. Eventually we'll see what resolves, but for now 7,750 - 7,800 is support and 8,100 - 8,200 is resistance.