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The Way We Were: One Year Ago on March 15, 2010

HedgeFundLIVE — Let’s rewind back to exactly one year ago on March 15, 2010 and see what out Chief Market Strategist Jeremy Klein had to say on that day:

Getting Close… Beware of the Ides of March


Typically, the Monday following Selection Sunday for the NCAA Men’s Basketball Tournament affords me a chance to woof up my alma mater and its far overinflated expectations of success over the next 3 weeks to all those willing to read along. Alas, since the hoops team finished with a 14-18 record, our archrival California won the Pac 10 regular season title, and Stanford’s first football game sits an endless 173 days away, I would rather jump right into the actual market commentary for the day. So shall we get right to it?

We’re close. Friday provided another interesting less than 10 handle range day on the S&P 500. Cherry picking soft expectations because of last month’s snow storms, solid Retail Sales data lifted the futures premarket into unchartered territory since the days following the Lehman collapse in 2008. Stocks then sold off aggressively in the first hour of trade to fill the opening up gap and actually move into negative territory. To be sure, a modestly weaker than expected University of Michigan (also shut out of this year’s March Madness) Sentiment report played a bit of matador to the bulls as well, but overall, despite new 52 week intraday and closing highs made in the SPX thanks in large part to a scratch your head last hour 3+% advance in GE, the market traded poorly to again weaken another chink in the armor of this impressive 5 week rally we have enjoyed.

With my Rolling Closing Average Tick indicator climbing to the highly overbought level of 696 and half of the day’s volumes in the S&P E-Minis on Friday coming by 10:50 AM to coincide with the selloff, my confidence of a pullback occurring sometime this week has started to bubble over despite eleven straight positive days in the futures and a higher high versus the previous session’s in ten of them. Lost in the aforementioned GE Mack Truck explosion, however, the Financials concurrently and curiously fell out of bed such that if it comes down between a fight between Mr. Immelt & Co. and the entire banking industry, I think we all know that if the latter wants to drag down the rest of the market with it, it will do just that.

While I will preview the FOMC rate decision in my commentary as well as via our webinar broadcast tomorrow, clearly the Fed will provide the pivot on a week that finishes with expiration. I expect an intermediate top to occur sometime in between the two events with a just enough to cause real pain 5-6% retracement coming thereafter. Why only 5-6% as opposed to the near 10% we endured earlier in the year? Quite simply, similar to the run up during 2003-2007 when anyone who bought dips was rewarded, money managers will not sit idly or exacerbate selling to allow stocks to get that cheap again until the long term fundamentals break as we all recognize the big year-to-date winners are those who saw the SPX at 1040 as an opportunity rather than a panic.

The Empire Manufacturing Survey with a consensus of 22 provides most of the excitement on the docket today, yet most traders will ignore that anyway. About the only thing worth watching is whether Friday’s overnight high in the Spooz of 1152, which we reached not too long after the Census Bureau announced Retail Sales, gets taken out, for I often find spike moves up or down after an important number to be a very good technical level. Regardless of how we play out today, most importantly, we will once again inch closer to the market’s next big inflection point.

S&P 500 June E-Minis Key Technical Levels

Support: 1140.25, 1136.75, 1134.00, 1129.50, 1121.50, 1111.00/10.50, 1102.50, 1100

Resistance: 1146.50, 1150.00/50.25, 1152.00, 1160.50, 1170.00, 1172.50, 1175.00

Where we were then:

S&P Futures

Open: 1151.00

High: 1151.00

Low: 1141.25

Close: 1150.25

Where we are now:

Last: 1272.00