Stock Indexes on Upward Trend Ahead of Key Economic Data

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Stocks Recover Ahead of Key Data
By Carley Garner
March 04, 2011

A positive ADP prediction on Wednesday followed by the best weekly jobless claims print in over two years triggered a sharp short covering rally ahead of today's coveted employment report. However, retreating oil prices was the original catalyst.

Yesterday's rally was done on rather light volume, but we don't necessarily believe that is "bearish". In fact, in recent years we have observed the market sell off on large volume and rally on light and although this is against conventional wisdom, we think it bodes for some more upside. The lack of liquidity is just what the indices need to continue squeezing shorts and forging gains. The market is eagerly awaiting today's jobs number. Most are looking for an increase in jobs to the tune of 190,000 and I think we will get it. After all, the previous months have been big disappointments and the pendulum tends to swing. That said, the market has had the last two days to price in a good number. This leaves the door open for initial disappointment and possible equity market weakness, but overall we think the dip will be bought up.

The current pattern is somewhat similar to that of April 2010, and we might in fact be in the midst of some sort of mid-year topping process. Nonetheless, the charts are pointing to at least one more new high. If we are right, look for the March S&P to make new 2011 highs, likely in the mid-to-high 1350's. This equates to the mid-to-high 840's in the Russell and 2440 in the NASDAQ wouldn't be out of the question! Despite these rather "bold" predictions, yesterday was a big day for the bulls and we are bound to get some back and filling. Look for intraday support near 1320/1318 in the S&P and 820 in the Russell.

* 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.