US stock futures have fallen sharply from pre-market highs and now point to a lower open Wednesday following yesterday's 3% gain. European stocks had added to yesterday's gain early this morning after the ECB loaned a record amount of money to the continent's troubled banks, but the optimism didn't last long. The loans are evidence that the banking system is in dire straits, and are expected to only have a minimal lasting impact on sentiment.
The ECB loaned a massive $639 billion dollars (489 billion Euros) over three-years to the banks. To put that amount into perspective, one-year loans in June 2009 after the collpase of Lehman Brothers totaled 442 billion Euros. The region was also boosted this morning by news that Norway, insulated from the crisis so far by its gas and oil export-driven economy, would loan $9.3 billion to the IMF to help the most indebted countres avoid default.
Also weighing on the futures this morning was a surprising earnings miss from Oracle (ORCL), which is down 10% pre-market following the report. German rival SAP (SAP) also fell sharply on the news, currently down 5.5% ahead of the open. CarMax (KMX) and Walgreen (WAG) also are set for lower opens after failing to satisfy investors with their earnings reports. In contrast, Nike (NKE) continues its recent strength and is 1.5% higher after exceeding analysts expectations on the top and bottom line.
Yesterday’s action led Investor’s Business Daily put us back in a “Confirmed Rally”. Although it doesn’t always lead to a major bull run, none have started without one! I’m not looking for a massive move, but some follow-through would be encouraging for this broken market.
TECHNICAL TAKE
Next resistance in the SPY is $124.95-125.55, which is an area that could definitely contain any potential rally today. The real Resistance zone is $126.18-126.80.
IF the market starts to probe some of yesterday’s massive move lower, the top third of the move should hold to show dip buying. $122.80-123.23 would be area to look for some support to buy or cover if you decided to start a cheeky short.
The Gap starts at $122, and if we traded back to that level it would be frustrating for the bulls. Let's see if Santa can stay a little longer.
*DISCLOSURES: Scott Redler is long the SPY, GOOG, AAPL, GS, BAC.
