Much of yesterday’s rally was predicated on a rumor being circulated about the US Treasury planning to price fix new home mortgage interest rates at 4.5% and other whispers. Many who selectively watch the news or ignore it may fail to fully realize how this short term optimism can impact markets.
We had a sleu of negative economic data yesterday, but it was trumped by the aforementioned rumor and speculation that the TARP be brought back to fund more bailouts. Today we see terrible same store sales from every chain but Wal-Mart. We also have unemployment claims at over 500k and factory orders at 10am that promise to be nothing short of terrible.
There will be plenty of Fed speak today. I can’t for the life of me imagine any optimism they could install after yesterday’s gloomy beige book. Most of the chatter will probably be about how the Fed wants to avoid cutting to 0% by using quantitative easing strategies, such as buying long bonds and forcing prime interest rates lower.
The futures are weaker by about 2% this morning, giving back much of yesterday’s gains. Market gains made Tuesday and yesterday are still part of a bear market rally. Markets are facing the upper resistance line of a falling six month wedge pattern on all major indexes. Don’t get BULLied! Remember the trend is your friend.
