Daily Commentary for Wednesday, February 28, 2007
Well for Tuesday giving my normal up or down day and volume update doesn’t seem to do this day justice. So let’s say it was a vertical drop from 12,600 feet and it never looked back. Volume on the Nasdaq was huge, only one day higher all of 2006 and that was June 30th. NYSE larger than any volume we’ve seen in the past few years. Giving us a lot of participation. So now we get to sort out, was it sitting stops getting hit, sitting buy orders, orders being put in today to buy/sell, and program action. Well I think it was some of everything. We don’t get this type of volume from one source. Even futures put in all time highs on volume, a director at the CME told me the volume was at record pace by mid day. That is unreal when you think about some of the light days we had over the past few weeks.
Three primary reasons are being given for this drop. First was China’s government is said to be slowing the economy which tanked their markets. Second was durable goods showed the economy slowly (a lot). Third was the world tensions that are escalating. However lets remember a few things. China is new news, but not much else here is. The markets are long overdue for a correction, so to me this was a correction that escalated a bit to quickly. In a single day we gave back the 2007 gains. But when you look at charts from July (where we bottomed) up through February we’ve been in a big up trend. Nothing goes up forever and pullbacks happen for corrective action.
Crude climbed but only closed up 7 cents at $61.46 at the close. Oil inventories tomorrow should rattle that market. Gold fell today down $2.60 at $687.20 on the day. Some talk of hedges having to cover positions gave gold that extra drop. However, I must say with the Iran issues escalating I’m surprised to see gold down. Usually that becomes a safe haven so we need to watch that tomorrow and look for some upside.
Going into Wednesday economic data could again give us volatility and FOMC Chairman Bernanke is speaking. The market will be on edge for that. I expect some slow action and a lot of jitters. This volume is nothing short of stunning, so now we have to deal with margin calls, the Johnny come lately buyers and sellers, which will add additional volatility Wednesday. GDP will be a big deal along with the Chicago PMI. The market has been very reactive to data this week, so hang on to your hats.
If it were not for the economic data I would say we take one more dip down and then find some upside to work off the short term oversold conditions. But really no bias going into the data and we’ll take each piece as it comes. Keep in mind we are not even to 38.2% on this run up so more downside can still come and just be corrective. July’s lows are WAY down there so that first retracement could still come to us. Use the charts below to see those levels. We could have some really slow motion tomorrow as the market tries to figure out what is going on and how to digest this move. So don’t be antsy and think we have another huge day. It will come when it comes.
Economic data for the Week of February 26-March 2, 2007 Wednesday 08:30 GDP Prel., 08:30 Chain Deflator-Prel, 08:55 Fed Bank Pres. Geithner speaks, 09:45 Chicago PMI, 10:00 Chairman Bernanke speaks, 10:00 New Home Sales, 10:30 Crude Inventories, Thursday 08:30 Personal Income, 08:30 Personal Spending, 08:30 Initial Claims, 10:00 Construction Spending, 10:00 ISM Index, 12:00 Treasury Secretary Paulson speaks, 17:00 Auto Sales, 17:00 Truck Sales, Friday 07:00 Fed Bank President Poole speaks, 10:00 Mich Sentiment Rev., 11:00 Fed Chairman Bernanke speaks.
Some earnings for the week: Wednesday pre market AES, BRL, DLTR, JOYG, KG, LIZ, MSO, S, SUNH, VSE, VPHM, OATS and after the close LTD, NABI, PETM, SMSI, TYL, UHS. Thursday pre market CKP, DISH, PDE, SPLS, THE, and after the close AIG, CMOS, DELL, GPS, ISLE, KSS, LF, NOVL, OVTI, PSUN, PAY. Friday nothing of interest.
ES (S&P 500 e-mini) Wednesday’s pivot is 1408.25, the weekly is 1456.25. Intra day support: 1394.25, 1392.75, 1389,1382.50, 1380.25, 1374, 1371.25, 1360.50. Resistance to look for: 1408.25, 1414.25, 1420.25, 1428.75. . 60 minute chart is below.
I hope everyone has a great day.
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