Two Rays of Sunshine Land on the Bulls

Pre-market futures are up sharply on WFC and Initial Jobless Claims. WFC "warned" about earnings, but just like JNPR yesterday, WFC had a good warning. The company expects first quarter earnings to be more than double the analyst consensus. WFC is the primary market driver today, which means banks and financials will also be movers and shakers this morning.

The second ray of sunshine for the Bulls was that Initial Jobless Claims reported "only" 654k claims vs. the 660k expected.

The news is countered a little by the poor Same Store Sales reports that have come in this morning. Retailers will probably underperform on the day. Nevertheless, you know the mood and fixation of traders as well as I do. If fundies could run up the market 10,000 points today they'd do it without even thinking twice about the ramifications. So all fundy eyes are fixed squarely on bullish things today, and they'll probably trade it that way most of the day.

Refer to the chart of the Dow, and the comments about the Bull Flag with targets of 81.00 - 83.00 that I posted in the market wrap yesterday. I speculate that the bullish scenario will play out today, with a decent probability of hitting 81.00 eventually.

7:31 am MT: The DIA gapped open right to the 80.00 area (79.91), which is a huge gap. It may be too large for traders to pop price action straight up to 81.00 right out of the gate. It may have to wiggle back a bit for a few minutes.

The 79.50 - 79.75 area is probably going to be the first testing area. Technical traders can see the 81.00 target as well as I can, and that means the Googly-Eyes and all other Fast Money is chomping at the bit and getting the sweats staring at the next target.

7:43 am MT: Here is a 30m chart of the DIA showing the intra-day Diagonal Channel (Bull Flag I pointed out on the Daily Charts yesterday). It also shows how huge the gap was this morning:
(click on image to enlarge)

The market tested the 79.75 area (79.76) I speculated, and is making a second push. If you cherry picked a small position after the first wiggle, it's probably ok. Ideally, the market will flag a bit here, perhaps on the 10m - 15m charts. But when I can see the whites of the Googly-Eyes, I know that I probably have to cherry pick a little if I don't want to miss a move.

7:49 am MT: The fundies grabbed stocks on the first Bull Flag they saw, which was on the 5m charts, and the market has been pushing a little to new morning highs. This is exactly what I was talking about when I said I can see the whites of the Googly-Eyes. You basically have to cherry pick a little in order to not miss the move.

7:53 am MT: Here is a 5m chart of the DIA showing the first Bull Flag to 79.76, which fundies immediately jumped on:
(click on image to enlarge)

Many fund managers are still operating with the "buy every dip" playbook. So be aware of that today. This move may exhaust itself in the 81.00 area eventually and then have to go in to a longer consolidation for an hour or so, but the fundies will probably maintain a fixation through much of the day as they buy the dips.

8:01 am MT: The current thrust off the 5m Bull Flag will probably run out of gas in the 80.50 area, with 80.75 as the extreme move. I speculate that 80.50 will probably be the more realistic target at this moment, before a pullback on the 5m charts.

8:03 am MT: Here is a 5m chart of the DIA showing the two resistance targets on the current thrust, with 80.50 being more realistic, but 80.75 being possible:
(click on image to enlarge)

Once again, expect the fundy fixation to be a factor most of the day. Even though the market is about to pull back a bit on the 5m charts, eventually traders will probably put a bid under the pullback and try for another push. I don't think the market will make it through the 81.00 area (80.75 - 81.00) today, but traders may keep trying to push the market there a couple of times after intra-day pullbacks. And once again, expect a little bit longer intra-day consolidation after the third to fourth push this morning (we are on push number two currently).

8:10 am MT: The second push did end in the 80.50 area (80.52). I don't expect a pullback to drop much below the 80.00 - 80.20 area before the technical traders and Fast Money try for a third push in to the 80.75 area.

8:13 am MT: I have focused you on the DIA charts because the technical targets were clear for the market to see. Switching over to the SPX, you can see that it actually broke to new highs this morning. The SPX is also starting to run out of gas right at 850 (850.80). The 850 area was my max target for the uptrend over a week ago before the pullback. The pullback allowed for enough consolidation to build strength for this current thrust today. The best case scenario is a run to the 870 area on the current swing, although that's a bit extreme. More likely the 855 - 860 area is the realistic target on the SPX for the current swing, with 850 being the first pausing point this morning.

8:19 am MT: Here is a daily chart of the SPX showing the bounce up to the 850 area:
(click on image to enlarge)

8:19 am MT: Here is a 30m chart of the SPY showing the gap this morning. Compare the move on the SPY to the move on the DIA 30m chart I posted earlier:
(click on image to enlarge)

The SPY (and SPX) exceeded the highs of the Diagonal Channel, which pushed the market (SPX) to new highs this morning, whereas the DIA (and Dow) is still below the highs of its channel, and not making new highs yet. This is because financials are the biggest sector on the SPX, and banks (because of WFC) had an 11% move this morning while the market was only up about 3%. Banks really are carrying the market right now.

8:36 am MT: The fundies held the 80.30 area on the DIA and are trying a third push, but it's obvious that traders are running out of gas a little this morning. It's possible the market may go to 80.75 right here. If it does, then the third push is probably the last before a longer intra-day consolidation. If the DIA doubles back, then expect the price action to crunch along the 80.00 - 80.30 area for a bit before gathering energy for another attempt on the 80.75 - 81.00 area.

8:43 am MT: The market is doubling back a little, so it's door number two. The DIA will probably consolidate back into the 80.00 area and gather strength for what the fundies hope will be another push to new intra-day highs later on.

8:55 am MT: Switch over to the 15m charts of the DIA and SPY now, and use both to guide you with your Top Down analysis. Watch the DIA because the overhead resistance targets are clear and present, and follow the SPY because all the hot activity is going on in Financials. I'm going to work on projects for the new service again for awhile.

9:40 am MT: The market continues to pull back. If the 79.75 area doesn't hold on the DIA, and the market drops to the 79.25 - 79.50 area, then don't expect new highs on the day. We will probably see one more push towards the 80.50 area after a drop that deep, but the best chance the market has to make new intra-day highs is if it bounces in the 79.75 area in the next few minutes. Switch between the 15m and 30m charts now to spot any bounces.

One other key note: Tomorrow is Good Friday so the stock market will be closed. That means the pullback right now, which is going a little deeper than expected, is a sign that some traders want to lock some of the profits on the uptrend and check out early for the three-day weekend. It also means that the pushes later in the day will probably also be met with similar profit-taking, especially in the last hour of the day. So the next push on the 30m charts may be the last big push. Any big push going in to the last hour will be susceptible to profit taking.

9:56 am MT: This is the first attempted bounce on the 15m charts after the recent pullback.

10:35 am MT: The SPY and DIA did bounce, but the follow through is lacking much gusto. Traders are in the mid-day blahs right now, which is not a problem. If price action holds up through the blahs, then traders will probably try for one more push to the highs or a little beyond later in the day. And then of course, watch for the last-hour profit taking.

12:00 pm MT: The market price action continues to follow a pretty predictable pattern from what I described earlier. I picked up some SPY calls on the pullback to 84.45 a few hours ago and I am getting ready to sell most of them for about a 7% gain in two hours. Traders will probably retreat from the 85.10 area or so on the SPY, but there may still be one more little push before any last hour profit-taking hits. We shall see.....

12:54 pm MT: There's the final push I was looking for. The SPY peaked right at 85.50, which was the max target on the day I was looking for. I sold the SPY calls for a total of an 8% profit in about three hours. I'm standing back now and looking for consolidation and profit-taking into the three-day weekend.

5:15 pm MT: Market Wrap: The market closed strong, and the SPX closed at its highs thanks to a late surge in bank stocks. The SPX (market) finished up +3.81%, which is a strong day, but the BKX (banking index) finished up +20.11%, which is a white hot day. The BKX also broke out of an Ascending Triangle, which was the right side of a Reverse Head and Shoulders bottom. The move on the banks and the strong close on the SPX suggests that traders still want to push the market up on Monday. This is getting beyond extreme, nevertheless the SPX has the 875 area well within the target zone right now. I've been playing calls this week, and I see no reason to change on Monday, especially since earnings season won't get up to speed until Tuesday.

Remember that the market is closed tomorrow.