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| EUR/USD Hourly |
Stocks are rallying on the not terrible news out of Europe that Greece will be saved with additional debt. We are working off oversold levels and this rally will present a nice opportunity to short into the ISM report Friday morning if it looks like it will come out bad.
A potential wave count has this movement as a sideways consolidating wave four using the 200 day SMA as support. Fifth waves are typically violent movements but with unpredictable durations. The market breaks sharply out of the sideways fourth wave and falls until it can catch a bid and begin a retracement. A break below the 200 day moving average and the channel boundary for the whole rally since March 2009, the minimum targets of such a move, would add to fear-driven selling.
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| S&P 500 Index Daily |
I've been building a regression model to estimate the ISM based on the results of the regional surveys. Most have been exceptionally weak, but the Richmond Fed survey rebounded into slightly positive territory this morning. Using the variables available to us now, the model estimates the ISM will come in at 49.5, below the consensus estimate of 52. A sub-50 print the day QE2 ends would likely be a rough day for stocks. I'll have more when the rest of the surveys are released on Thursday.