.."no worse than feared"..might be the ticket to test 1088SPX/50ma from EPS and macro data this week. If a big 'tailspin' in the economy is not so clear, the market can become a market again!.
Instead of blaming ‘dogs day of summer’ as most traders like to do this time of the year, the last 3 trading days and it’s tight range is really a confusion stemming from the speculation on the FED’s monetary policy change announced last Wednesday. Investors/traders are simply asking where will this ‘lead’ for the short term market trend. Today’s early action and gap down to 50% retrace of summer rally to 1070 may have been a short term ‘floor’ put in and the ‘cat and mouse’ game may move to the next level with some covering shortly up to last weeks range high (50ma/1088).
The first sign of a floor might be in the beaten up SMH this morning after 3 days of at the $26 level, today we saw first signs of short covering here to lead the early reversal. If earnings this week for July end Q are ‘no worse than feared’, this might be all it will take for this stabilization to continue. We already say a relief bid hit 'retailers' “LOW’ after bland earnings and this spread to HD etc.
On the Macro eco’ side, today’s reaction to a poor Empire State number may also prove to be a ‘no worse than feared’ mentality hitting the market. The headline number may have increased, but it’s what inside that counts and it was negative as ‘orders /shipments/ future expectations ’ went sour ‘south‘ (not seen since mid 2009).
Tomorrow's data reactions, if like today's, will give more clarity if the market wants some risk back. Of course, a weaker USD will strengthen the case for a short term 'floor' here.