Thursday, February 28, 2008

Today's Markets

Just when you thought it was safe to go back in into the returns. The dreaded trading range (cue dramatic B-movie horror music).

The IWMs were easy to draw. The SPYs and QQQQs were a bit harder because there have been some moves outside of the range that lasted for a few days but then corrected. The lines I drew were eyeballed and there is the strong possibility of debate about where they actually are. But it's pretty obvious there is a floor somewhere around where the lines are.

So -- what's it gonna take to make the markets?

First, I don't think we're moving meaningfully higher anytime soon. Just look at the news we've had this week -- housing is still in the dumps, growth is weak, durable goods orders are down, inflation is making a most unwelcome comeback and the Fed is pretty down on the economy. These are not data points that get people calling their brokers saying, "buy now." Assuming the news continues in this vein -- as in bad -- don't expect a rally.

The only good news was the Fed is ready to cut rates -- but that wasn't enough to spark a rally. In fact, I think the only thing keeping the market afloat right now is the Fed's continued action and further action.

So -- what will send the market lower? I think the next leg down will be caused by weak earnings. Right now it looks like traders think the market is fairly priced given the underlying economic fundamentals. But if it looks like earnings are taking another hit expect the sell orders to increase.