Bounce

The BPCOMPQ comes through again in calling the bounce. The trading day started out with a downside bias again as investors reacted to a string of disappointing same-store sales reports from the retail sector – and for a while, it looked as though stocks were going to suffer through yet another day of selling pressure. However, positive news helped the market back into positive territory by the afternoon: Federal Chairman Bernanke hinted at further interest-rate cuts, and Bank of America (BAC) announced it's in late-stage talks to buy out Countrywide Financial (CFC).

The Dow Jones Industrial Average (DJIA – 12,853.09) settled on a gain of 117 points, or nearly 1%, by the time the closing bell sounded. All but 6 of the Dow's 30 components closed higher. The DOW's intraday gains found a ceiling near the 12,920 level, though it has reestablished a foothold north of its 20-month moving average.

The S&P 500 Index (SPX – 1,420.33) added 11 points, to settle atop the 1,420 level for the first time since January 3. The Nasdaq Composite (COMP – 2,488.5) rose by an even 14 points, extending its winning streak to 2 sessions. The NAS is now just a slightly below support from its 20-month trendline.


Crude-oil futures declined today, as concerns over a possible slowdown in the global economy led investors to believe that demand could lessen. Yesterday, Goldman Sachs warned that a U.S. recession could be on the horizon; today, the investment bank followed up by saying there's a 50% chance that a similar economic pullback could hit Japan in 2008. According to MarketWatch, the U.S. and Japan account for one-third of global oil consumption. However, crude pared its losses in late-afternoon trading as investors reacted to Bernanke's implication that the Fed could cut rates again this month.

The promise of another Federal Reserve rate cut was also bullish for gold; February-dated gold soared to a new record high of $897.30 an ounce, blowing past its recently attained previous high of $894.40. The Gold rose as the U.S. dollar traded lower against the euro and the yen in the wake of Bernanke's comments. By the close, the front-month gold contract tacked on $11.90 to close at $893.60 an ounce.

Levels to Watch in Trading:


Dow Jones Industrial Average (DJIA – 12,853.1) - support at 12,500; resistance at 14,000


S&P 500 Index (SPX – 1,420.33) - support at 1,365; resistance at 1,510


Nasdaq Composite (COMP – 2,488.50) - support at 2,350; resistance at 2,750