Perfect News for the Bulls, Consolidation for the Market

Pre-market futures are up huge again on the perfect morning for the bulls. Every bit of data last night and this morning is absolutely perfect for the fundies right down to the dotted i and the crossed t.
It started with CSCO beating earnings last night. The stock is up 2.65% in pre-market trading. Then PRU beat earnings last night as well and insurance, which was already on the move yesterday (PRU, MET), is set to gap up even further today. GM posted better than expected earnings results this morning (must be all the cars the union is selling now), and its stock is up pre market. The Energy sector, which is already on the move, got another boost from earnings reports from CAM, FTO, and PXP this morning. All three stocks are up pre market. Gold, which is starting to bounce up from support, is catching a tailwind from GG's and RGLD's earnigs reports this morning. Both stocks are up pre market. Even FNM is up pre-market after posting its earnings.

The economic reports are all bullish as well. Initial Jobless Claims came in at 601k vs. 635k expected, which is exactly what the bulls were positioning for at the close yesterday. They will be looking for additional "good news" from the big government Employment Report tomorrow morning. Also this morning, Productivity reported at 0.8% vs. 0.6% expected, which is also being cheered on as "good news", although what the report is actually showing is that employers are squeezing more work out of less people. Nevertheless, the number is higher than the number traders thought is was going to be so the number must be good news.

If you thought I was done, guess again. Same Store Sales reports this morning are "beating expectations." For instance, JWN had a 10.8% decline in monthly same store sales, but traders were expecting a worse 12.1% decline, so more good news. JWN, JCP, WMT, TGT, ROST, and KSS are all up pre market, just to name a few.

Now, this is where I'm done, right? Nope. The European Central Bank cut its key interest rate to a new record low of 1% this morning. All the European indexes are up between 1% - 2% today.

And of course, now I'm done. Sorry. The Fed has put its own spin on the stress test news. They like what they see, they really do. They called the stress test results "reassuring" for the banks. The banks, which were already on the move, will get a further boost by the "good news" this morning. Stocks like JPM, WFC, USB, BAC, C, GS, BK, STT, BBT, NTRS, PNC, STI, and RKH are all up this morning.

It's a giant party for the bulls, and a big gap up in the SPY will go along with the party. The SPY and SPX are right in the middle of resistance zones, so the price action today will probably be similar to yesterday in that there will be big gap and then some wiggle before the bulls start rowing again. Sometimes, when everything is so perfect the bulls will actaully take profits on the news, especially when the indeces are at resistance and the trend has moved sharper than any time in the past 70 years. But these are determined bulls we're talking about here. So even if they do take profits, watch for an intra-day basing point, just like the last two days, and then see if the bulls make a push to position themselves ahead of the Employment Report tomorrow.

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

You can see how close the market is to the top end of the resistance zone. The SPX will climb about half the zone to the 930 area right out of the gate. Resistance is obviously the 940 area. The red flag support area is a drop below 920 (give it a little wiggle room to about 918 - 920). A signal that traders are ready to take profits on the current move would be a drop below the 905 - 910 area. Any drop below 910 and the short term move is probably over.

12:25 pm MT: We got red flag number one in the first hour, which put the market into a similar mode as yesterday. Then we got red flag number two a little over an hour ago. The selling today is creating a Bearish Engulfing on the SPY and a Dark Cloud Cover on the SPX so far. These bulls are still an excitable bunch, and they still see 2007 in their eyes, and yesterday I was a little premature in writing the move down as probably over, but today it looks like the short term move is done and the SPX may be headed into consolidation and a move towards 880.

1:10 pm MT: The monkey really did ring the bell today. The fundies are probably sensing from each other that everyone is profit-taking, which is keeping today a momentum day to the downside.

The fund managers have been wearing these for awhile:

It looks like the happy 2007 glasses came off today. We'll see if they strap 'em back on sometime soon and go for another ride to the euphoria zone. I speculate that we won't get the good-time partying again until after a test of the 880 area on the SPX and a few more news bogeys.....

1:35 pm MT: Every time the Googly-Eyes try to buy a dip and base the market, the rest of the fund managers are selling right on top of them. This looks like it will be the first day in over a week that the bulls won't put a big buy order in right at the close. I suspect they will be too scared to get aggressive at the close, even though the Employment Report comes out tomorrow morning and will probably be better than expected. There may be a bit of jostling into the close, but not as emphatic as the past three days.