Monday closed the day with major market indexes at their worst levels of 2004. Beyond raw price, this internal view of the NYSE tells the whole story:
After the longest period of high levels of new highs in many years - not surprising coming off the dramatic sell off of the first bear market of this century, the market very quickly reversed and new lows on the NYSE expanded dramatically, reaching levels now associated with at least intermediate bottoming action.
We also saw price neatly set up on all the major US indexes for a test of the March swing lows:
In Canada, the test of the large cap and broad indexes is going to be of the April lows as the additional weakness in commodity-based stocks has accentuated selling in that marketplace:
Futures before the bell have price opening at or slightly above Mondays highs (highlighted in blue):
Ostensibly futures are trading up as traders look to the earnings report from CSCO after the bell to add confidence to investors and bring buying back into the market place. This expectation appears to be based on past experience, where at the pits of investor confidence, when most companies were not reporting business expansion, CSCO came out with a very strong outlook on its own business and its view of the world economy. Markets rallied strongly after that event.
We have to wonder if history will repeat itself exactly here, given that companies have been reporting strong earnings growth for a number of quarters, and this quarter's earnings season in particular has delivered particularly strong news and upward revision of business forecasts for a significant percentage of the S&P500.
Still, traders and investors will do what they will do and price will act accordingly. At a test of a significant swing low, we have to be prepared that price may move up; we also have to be prepared for the day after as well, in case investors find little to cheer about in CSCO news after the bell. /Mike
04.05.11 09:09 #