Is Expected Market Pullback Over Already?
Thursday, February 28, 9:25 a.m. It has been widely recognized that the market was overbought and due for a correction. Expectations are all over the lot, ranging from just a brief pullback to forecasts of a correction that would mark the end of the four-year bull market. We expected it would be only a brief [...]

Thursday, February 28, 9:25 a.m.

It has been widely recognized that the market was overbought and due for a correction. Expectations are all over the lot, ranging from just a brief pullback to forecasts of a correction that would mark the end of the four-year bull market.

We expected it would be only a brief pullback to alleviate the short-term oversold condition above 50-day moving averages.

We gave the support levels that would potentially halt any pullback as the 21-day m.a., the 50-day m.a., and a trend-line drawn through the last two lows, with the 50-day m.a. the most likely before the rally resumed.

The 21-day m.a. did not hold, but so far the 50-day m.a. has done so.

It’s too early to be sure. A two-day triple-digit rally is of no more significance than a two-day triple-digit decline. But so far the 50-day moving average has held.

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We are still in the short-term ‘monthly strength period’ until next Wednesday. But the market may need a few days to digest a 290 point Dow 2-day gain, before the picture becomes more clear.

And this morning’s revision of 4th quarter GDP which we thought would be the most important economic report this week, was disappointing.

As expected the initial report that 4th quarter GDP had contracted –0.1% was revised to a positive reading as more data has become available. But it was revised to only +0.1%, well under the +0.3% expected (+0.5% was expected by the consensus of analysts polled by MarketWatch).

That’s enough disappointment to be the catalyst to at least pause the rally again. To say nothing of concerns about the automatic government spending cuts due to begin today if a last minute agreement is not reached.

So it’s too early to be sure the support at the 50-day m.a. has been successfully retested.

To read my weekend newspaper column click here: How Long Can Economy’s Sweet Spot Last This Time-

Subscribers to Street Smart Report: There is an in-depth mid-week markets update (U.S. stock market, gold, bonds) in your secure area of the Street Smart Report website.

Yesterday in the U.S. Market.

A 2nd straight triple-digit gain for the Dow that more than recovered all of Monday’s plunge, and has the Dow at a new high for the winter rally and the bull market.

The Dow closed up 175 points, or 1.3%. The S&P 500 also closed up 1.3%. The NYSE Composite closed up 1.3%. The Nasdaq closed up 1.0%. The Nasdaq 100 closed up 1.0%. The Russell 2000 closed up 1.1%. The DJ Transportation Avg. closed up 2.9%. The DJ Utilities Avg closed up 1.1%.

Gold plunged $18 an ounce to $1,596.

Oil closed up $.22 a barrel at $92.85.

The U.S. dollar etf UUP closed down 0.4%.

The U.S. Treasury bond etf TLT closed down 0.3%.

Yesterday in European Markets.

European markets closed up yesterday. The overall Europe Dow closed up 1.4%. Among individual countries, the London FTSE closed up 0.9%. The German DAX closed up 1.0%. France’s CAC closed up 1.9%. Ireland closed down 0.3%. Italy closed up 1.8%. Spain closed up 2.0%. Russia closed up 0.2%.

Asian Markets closed up last night, some sharply.

The Asia Dow closed up 1.0%.

Among individual markets:

Australia closed up 1.3%. China closed up 2.3%. Hong Kong closed up 2.0%. India closed down 1.5%. Indonesia closed up 1.7%. Japan closed up 2.7%. Malaysia closed up 0.7%. Korea closed up 1.1%. Singapore closed up 0.3%. Taiwan closed up 0.2%. Thailand closed up 1.6%.

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Markets This Morning:

European markets are up again this morning. The Europe Dow is up 0.4%. Among individual countries the London FTSE is up 0.3%. The German DAX is up 0.6%. France’s CAC is down 0.2%. Norway is up 0.2%. Portugal is up 0.1%. Spain is up 0.4%. Switzerland is up 0.7%. Italy is down 0.2%. Russia is down 0.2%.

Oil is up $.07 a barrel at $92.83.

Gold is down $2 at $1,593.

This Morning in the U.S. Market:

This week has a heavy schedule of potential market-moving economic reports including New Home Sales, Consumer Confidence, Durable Goods Orders, the next revision of 4th quarter GDP, etc. To see the full list click here, and look at the left side of the page it takes you to.

Monday’s reports were that the Chicago Fed’s National Business Activity Index fell to-0.32 in January from +0.25 in December. But the 3-month m.a. rose to +0.3 in January from +.23 in December. And the Dallas Fed’s Mfg Index declined from 12.9 in January to 6.2 in February, suggesting growth continued but at a slower pace.

Tuesday’s reports were that the FHFA House Price Index which showed home prices rose 0.6% in December. And the Case-Shiller HPI Index showed prices on a seasonally adjusted basis were up 0.9%. New Home Sales jumped a big 15.6% in January to 437,000, much better than the consensus forecast of 384,000. Consumer Confidence, which had plunged in January, bounced back in February, rising to 69.6 from January’s level of 58.4. and the Richmond Fed’s Mfg Index, jumped to +6 in From –12 in January.

Yesterday’s reports were that Durable Goods Orders fell 5.2% in January versus a 3.7 gain in December. But ex-transportation orders, Durable Goods Orders were up 1.9%, the quickest pace in more than a year. And Pending Home Sales rose 4.5% in January.

This morning’s reports are that new weekly unemployment claims fell by 22,000 last week to 344,000, much better than the consensus forecast of 362,000 claims. The four-week moving average of claims fell by 6,750 to 355,000. And 4th quarter GDP was revised up from the initial report of having rolled over to –0.1% to +0.1% growth, not as dramatic as the consensus forecast of a revision to 0.3%.

Our pre-open indicators have weakened some with the GDP report.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being down 30 points or so in the early going this morning.

To read my weekend newspaper column click here: How Long Can Economy’s Sweet Spot Last This Time-

Subscribers to Street Smart Report: There is an in-depth mid-week markets update (U.S. stock market, gold, bonds) from yesterday in your secure area of the Street Smart Report website.

I’ll be back with the next regular blog post on Saturday morning, as usual later than on the week-days, probably around 11:00 a.m.

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