Market Commentary for Wednesday, March 21, 2007
Tuesday another green day for the markets, the end of day action managed to push volume just over yesterdays for an accumulation day. The weakness and drop in the Semiconductor sector yesterday was regained today led by SNDK, MRVL,KLAC and ALTR. As the market crept along again today Chairman Bernanke’s presence was felt by the lack of interest to move the market.
The Fed Fund Futures have 100% price in no change upon tomorrow’s announcement. Bernanke maybe between a rock and a hard spot with his statement though. His balancing act with the Fed Fund rate is — does he control inflation which would result in undermining economic growth if it were to get out of hand? OR does he worry about the real estate market and credit of the consumer leading us to a consumer led recession? If he says nothing about subprime markets will that scare the markets more than addressing it? So as you can see his job is not an easy one tomorrow to try to ease fears of volatility and uncertainty. I believe he will address the real estate slowing in some way with his statement, but try to keep a very flexible view on the subprime situation. Friday’s CPI data pretty much put inflation at ease for the time being so he could tout the success of the Fed and leave the door open for future changes still.
Crude manage to stay under $57.00 to close up 14 cents at $56.73 on the day. Gold rallied up $4.70 to close at $659.00. We can look for additional volatility on Gold as after the FOMC statement Wednesday. Crude inventories are also due Wednesday, with the lack of pressure on oil price, inventory will be closely watched.
Wednesday is likely to start slow and then we’ll see the volatility once the 2:15 statement comes out. My bias for early is for a small pullback and to see the bulls wait to hear what Bernanke has to say. The volume and positioning will come once we hear what he has to say, so the rest of our week should go nicely. It has been a bit slow and lackluster thus far so lets hope his statement gives us a nice direction.
The broader indexes are sitting right at resistance, during the chat session today we went over the 60 minute charts. We saw a lot of possible inverted head and shoulders patterns (which are bullish if triggered). The close today left us at the necklines. Bernanke will either give us the juice to break and move higher or we’ll see this resistance hold and send us back down.
Economic Data for the Week of March19 – 23 Wednesday 07:00 MBA Purchase Applications, 10:30 Crude Inventories, 02:15 FOMC Announcement, Thursday 08:30 Initial Claims, 10:00 Leading Indicators, 10:30 Natural Gas inventories, 12:00 Fed Governor Kroszner speaks, 01:30 Fed Governor Kohn speaks, Friday 09:15 Phil Fed Bank Pres. Plosser speaks, 10:00 Existing Home Sales, 11:30 NY Fed Bank Pres Geithner speaks.
Some of the earnings for the week of March 19: Wednesday pre market DIET, GMTN, MS, ROST and after the bell HIS. Thursday pre market BKS, CAG, EBS, FDX, FRED, GIS, KBH, SCHL, WSM and after the bell COMS, ESIO, JBL, NKE, PALM. Friday nothing of interest.
ES (S&P 500 e-mini) Wednesday’s pivot is 1420, the weekly is 1399.25. The volume was slightly lighter today on futures than yesterday, even though equities were slightly higher. A move up through 1426.50 we are likely to see a move into 1438.75. Down through 1418.75 we can look for 1413.75 and even 1411. Intra day support: 1421.75, 1419.50, 1418.25, 1415.75, 1413.75, 1411, 1408.75, 1404.75, 1399 (gap fill). Resistance to look for: 1424, 1426.50, 1429.75, 1431.25, 1435.50, 1438.75, 1447.75. 60 minute chart is below
Remember the speed off the initial reaction isn’t for new folks usually. It will settle down and there will be a nice trade to come, so don’t get caught chasing or doing things you could regret. Stops are a must and you should adjust the trading sizes down until we settle in. Don’t look for a homerun, just treat this like any other day and use your daily goal to guide your decisions.
I know I’m rather interested in what Ben is going to say about the sub-prime mortgages and the overall effect they may have as the default rates rise.