STOCKS BATTLE BACK FROM THE ABYSS AS MARKETS PERCEIVE EQUITIES TO BE OVER SOLD, CLOSE NEAR FLAT.
US equities made a aggressive rebound after trading through significant support levels that appeared to be setting up for a potential retest of the November 2008 lows, traders & investors perceived the oversold condition of equities and began to cover shorts and initiate some new positions based on value picking in particular stocks which had been beaten down. Technologies led the initial comeback, as the perception that life at Apple without Steve Jobs became more palatable to investors, allowing them to revisit the idea that the technology sector will be a major beneficiary of upcoming stimulus programs.
Financial stocks rebounded from their lows as the markets perceived that institutions such as Bank of America would continue to receive financial support from the Federal Government and will one day be able to function unfettered from the toxic assets which have hampered their abilities to contribute to the global economic reboot. The release of the additional $350 billion of the Tarp package also promoted support for equities. Overall, the sentiment in the financial sector remains negative, despite a surprising profit posted by JP Morgan Chase.
Today's price movement boosted the VIX (volatility index) above 50 for the first time in 2009. This signifies that the markets may be due for a renewed period of strong price swings, returning to the confines of a traders market. This is understandable as the economic climate appears poised to make a decision regarding whether to offer support of capital to the proposed solutions designed to create the next wave of economic opportunity.
Technically, march Dow futures managed to rally from a 2nd dip below the oversold level on the 30 & 60 minute RSI indicators. The
upward momentum appears to be somewhat limited for the time being. Expect that the market will likely trade in a range between
8220 & 8020 for the near term. A break above 8260 could result in renewed upward momentum toward 8420, which represents a strong resistance level. Support remains near the 7960 level, with a break below signifying a move toward 7800, with possible downside risk to the November lows.