Tuesday morning thoughts

The market rallied off the morning gap down and never looked back. Cumulative ticks although sharply negative in the first 15 mins bottomed at -10,000 and trended higher the rest of the day to finish at +40,000. All other internals managed to turn around the bad start as well and finish positive apart from NYSE breadth and A/D lines which finished flat. Small caps and tech did better than the majors so that is a positive sign for risk and the markets overall. Quant studies are showing a bullish to flat bias here and with the current relatively large gap in the ES and other futures, the odds favour a gap and go (or at least a no gap fill situation) which means that the market should finish positive for today. More importantly however is the news that China and Japan will support the purchase of European sovereign bonds. That is a positive for the PIIGS s there is a lot of new issuance out this week. Overall this has calmed the markets somewhat and I will expect another retest of the the last swing highs before the week is out.