The markets are again showing signs that an oversold rally is coming. Let's work our way through the numbers:
Asia
China has a nice rally last night finishing strong and pulling Japan back from what would have been a much larger red close.
Europe
Europe is weakly up as the dollar fell apart overnight and the Euro rallied all night. Like a rising US Dollar is hard for the American stock market to rally against, the same is true for the Euro in relationship to the European stock Markets.
United States
Economic news
All economic news this morning is out at 10am today. Wholesale inventories might have an effect. A crossing of the 50% number, which we are very close to, for Economic Optimism should have a positive effect on the markets so that is also something to watch for.
Earnings
Looking quickly through the earnings announced so far this morning it looks as though the green outweighs the red. It appears we drank more Molson than Coca Cola as the year over year revenue numbers were up 5.4% for KO while TAP was able to increase their top line number by 11%. Energy conversion put up terrible numbers placing all the "Green Stocks" on the endangered species list.
Breadth Charts
40 DMA % Index
NYSE is still the worry here as it has not found a bottom. The NASDAQ and Russell 2000 are testing a low put in place on Friday. The chart scores a -6 today and still looks bearish.
10 Day High - Low
For those of us looking for a rally this is our best chart. The number of 10 day lows have dried up. We Still managed to make more lows than highs but the numbers have drastically been cut down. Our 5 DMA has resumed an upward slope on all three indicators. Overnight this chart has moved from a -6 to a +6.
52 Week New Highs
The 52 week new highs are turning a corner here also now. All three indices made higher bars than the previous trading day and the RUT 5 DMA turned from negative slope to flat. This chart moves from a -4 from Friday to a +1 today.
Conclusion
| Chart | Score |
| 40 DMA % Index | -6 |
| 10 Day High - Low | +6 |
| 52 Week New Highs | +1 |
| Total | +1 |
So our total score this morning is a +1. Moving from yesterday's bearish charts this is looking like a possible bottom in place.
$SPX
We move the lines a little today. The futures have rallied overnight and are setup for a large gap opening today. I would expect a little selling on the futures as we get nearer the actual market open this morning. The bears are going to feel trapped today.
The bulls need to hold the gap and leave yesterday's low behind. Prints above 1070 are in the bull territory. The 1085 Yellow line is the high probability failure point of the bulls. we marked that line pretty well yesterday.
The bears played a perfect game yesterday giving the bulls just enough encouragement in the morning and then fading it all away all afternoon and into the close. Today the bulls are going to get a head start and the bears are going to have to play hard early trying to fade the gap. First goal for the bears will be yesterday's lows and then the correction lows.
There should be some heavy selling overhead as the bulls attempt to rally. Watch the 1085 area.
-marlin (aka: RedlionTrader).
