Stock index futures vote and they want the market to stand on its feet!

As we expected, Bernanke did not deliver what the market (thought) it wanted...another round of stimulus.  Also as we thought might be the case, after a knee-jerk reaction to the downside traders realized that if the Fed has enough confidence to let the markets stand on its own two feet (at least for now), maybe they should too.  What we certainly didn't count on was this realization to occur so quickly! 

If you've been following this newsletter, we had believed it would take a few days for all of this to play out and instead it took a few hours.  The September e-mini S&P futures rallied from a low of 1132.75 to a high of 1178.75 in the span of 2 hours.  Nonetheless, today's action and events look bullish to us. 

In our opinion, Ben Bernanke was simply "kicking the can down the road".  Doing so gives the market time to digest the upcoming economic data and hopefully discover things aren't quite as bad as the markets have lead people to believe.  If the Fed chair felt the soft patch was extending into something more, he probably would have tried to head things off at the pass; instead he simply reminded investors the Fed would be there if needed and is willing to let previous stimulus work its way through the system. 

Today's data wasn't a catastrophe, and that in itself was good news but next week brings a hefty load of news to digest.  Traders will start the week with personal income and spending, and end the week with the employment report.  In between, we will hear about home sales, home prices, Chicago manufacturing, the ISM index and more. 

None of the stock indices quite reached the support levels we were eyeing coming into the session, but in the overall scheme of things they weren't far off and the fact that traders were happy to hold stocks over the weekend for the first time in weeks, we could be in store for some follow through buying.  Barring any suddenly (or maybe not so suddenly) bearish economic data it feels like the market could easily break out of the current wedge pattern and made an attempt at a recovery. 

A close above 1185 in  the September S&P confirms a break-out and should lead to a melt higher that could reach the mid 1260's.  Day traders can look for intraday resistance near 1185 and then again near 1203, intraday support lies at 1162 and then 1143.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.  Charts provided by Track 'n Trade, Gecko software.

**Seasonality is already factored into current prices, any references to such does not indicate future market action.

Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini.  Unless otherwise noted, profit and loss will be based on the mini version.

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*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

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Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.