As we expected, the markets bounced back today and started to fill their bearish gap down from Wednesday’s close. On the S&P500 that level is 1,166 (Wednesday’s close), watch for resistance to come into play as we approach that level. The news that seemed to jolt stocks higher today once again came out Europe. SPX was trading around 1,142 when news broke that new plans were being discussed to shore up European bank capital, the index then proceeded to rocket 20 points, closing at 1,162.
We feel though that this news is actually bad because it reveals that things in Europe are far worse than EU officials have been leading the markets on to believe. While this caused a rally today, we would like to remind readers that today’s rally came in the mist of an oversold market. Furthermore, the markets are still below their key resistance levels and there is no new evidence to suggest today’s rally will lead to a change in trend.
What we did notice today though is that our leading macro commodities oil and copper seemed to have found a short term bottom. Both initially traded lower this morning before reversing and finishing well off their lows. These potential short term bottoms should be constructive for the overall markets in the near term, but we still they are just that, SHORT term bottoms. We fully expect both to trade to new lows in the coming weeks/months ahead.
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