Yesterday was a crazy day. Mediocre/expected economic reports on jobless claims and trade gaps produced a burst out of the gates to the 1070 level on the S&P which, after being challenged a few times, then sprung the markets to a total 3% upside on the day! Not to mention, tell-tale Goldman Sachs was DOWN 3% on the day. For the past month, Goldman has been an hour or so ahead of the market -- and you could watch the 140 level on Goldman to tell if the markets were going to spring lower or higher depending. Well today Goldman turned south and the markets kept climbing north.
Is a VIX decline to 30 a signal of bullish confidence or complacency? Is low volume a sign of a sucker rally? Is this last week re-lived (where the markets jolted to gains on Thursday only to dive harder on Friday as economic reports disappointed and investor sought safety before the weekend)?
Tomorrow's economic reports are less likely to disappoint as strongly as last week's employment report. But with the low level of conviction displayed by investors over the past 2 months, its easy to see a day where investors sell into the strength of this rally and take some money off the table before entering the weekend.
1087 is a line in the sand, so if the markets open above that it could provide support for another run tomorrow. If they open below it, it'll be a classic ceiling that will attempt to push the markets back to the 1070 level.
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