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The Fundamentals:

- The market is consolidating in the presence of strong earnings reports, shifting the focus of this market to Friday's unemployment report. This has been a very important report, and should remain to be, as investors jockey thier positions in front of this number. Many analysts consider this report to be a key factor in reading the market's "recovery".

- Yesterday there were some good earnings reports from the likes of Colgate-Palmolive (CL 51.85 +1.51), Aflac (AFL 39.00 +1.19), and Tyco (TYC 27.80 +0.70) to provide some interest. (Briefing.Com)

The Reports:

- Dec Factory Orders 9:00

- ISM Non Manufacturing Index 9:00

The Technicals:

- The short-term and intermediate trends are arguably sideways. I drew a "wedge" on the chart to show the consolidation. A close above 1138.00 moves the short term trend higher and a close above 1142.00 moves the intermediate trend back to the upside. A close below 1126.00 moves both of the trends to the downside.

- The market is trading about 5 pts lower overnight, and we are set to test the double bottom formation at 1126.00-1126.50 early this morning. It should make for an interesting trading day.

The Long and the Short of it:

The market appears to be testing the patience of the bulls already this morning and it should be interesting to see if buying will come in as the market tests the lower support levels. With the jobless report set to come out on Friday I would expect no major moves in the market, but it is hard to tell with the market trading 5-7 pts lower overnight. The market has yet to close below the 20-day moving avg. in the face of this sell-off, and has seemed to rebound nicely every time it has dipped below this area. The 20 day MA is coming in at 1132.75. Today I am looking to be a buyer at teh S3 level 1122.75, and will hold off form selling until the R1 level is tested 1136.25.

Good Trading!

Michael A. Cavanaugh
My Futures Online
mike@fcillc.com
1-888-942-7829

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