In last three month, US stock market didn't drop even 100 point inspite of all the negative news and rallied upward of mediocre data. Since Nov 28, 2011, Dow has gained 1720 point (15.32%), S&P500 has added 207 point (17.87%), and Nasdaq has added 525 point (22%). This sound like a perfect bull market when all the economic data are just too perfect and easily beaten all the expectation, and there was no bad macro economic news from anywhere around the world. Nobody can justify this rally. This was just insane rally carried by the manipulator who knew there are maximum shorts in this market who took defensive step to protect their money and in turn lost huge money.
During the first LTRO operation ECB gave away 489 billion euro to 520 bank and stock market rallied 360 point in one day. A similar rally was expected today when ECB gave away 713 billion to 800 bank, but Dow lost 53 points. Always remember, stock market like to surprise majority of investor. If the news is out ahead of time, or the expectation is built up in advance, then there is reverse reaction to what majority expects. Gold was expected to rise with equity today but both dropped. During the first LTRO operation the news wasn't out till ECB alotted money to the bank and so it was taken by surprise.
As per ECB, it was its last operation, and FED chairman has not given any hint of new QE3 in todays testimony. So will the market come to reality ? It will come to reality only if stock market starts breaking important resistance level. Since 2008 crisis, stock market has been blackmailing government throughout the world for Free money. If the free money is stopped, then the market comes to reality and starts selling off. In last 3 month, ECB has printed over 1 trillion dollar to just bank, forget their bond buying program. Now that the expectation are over, the market will come to reality based on the economic data.
Some of the key resistance level in dow is 12907, 12889, 12780 while in S&P500 1352, 1340 and 1332.
Economic data to focus for tomorrow are
Jobless Claims 8:30 AM ET 335k is expected, higher is bearish, lower is bullish
Personal Income and Outlays 8:30 AM ET
|Personal Income - M/M change||0.5 %||0.5 %||0.2 % to 0.8 %|
|Consumer Spending - M/M change||0.0 %||0.4 %||0.2 % to 0.6 %|
|Core PCE price index - M/M change||0.2 %||0.2 %||0.1 % to 0.2 %|
ISM Mfg Index 10:00 AM ET 64.5 is expected, lower will be bearish, higher will be bullish
Construction Spending 10:00 AM ET 1% is expected, lower will be bearish, higher will be bullish sign.
Ben Bernanke Speaks 10:00 AM ET
Look at buying/shorting individual stocks rather then whole sector.