Stocks did get that follow-through day we were hoping for, a day later. There was a written pledge from EU leaders to support Greece. The Dollar didn’t react much, in fact it was higher early in the day. However, it eventually faded and that aided in the overall market rally. Greece isn’t out of the woods yet, nor are its neighbors. However, they are moving forward and that is better than it was a week ago when the market was falling precipitously on the outlook for a government default. Commodities rallied on the news, boosting gold by nearly 2% and crude by a little less than 1%, as crude waits for the delayed inventory data due out this morning. Basic Material and Energy sector stocks responded with a nice follow-through to the upside. Another key component of this rally being successful was that tech managed to contribute to the gain. The Semiconductors, SOX, really led the way based on the broader outlook for the global economies if Greece can avoid failure, and on the US economy, based on better-than-expected weekly claims.

T

he only economic report making it through the recent snow storm came out of the Department of Energy. They released Weekly Jobless Claims data through February 6^th. January data proved to be a disappointment. Each week, analysts were looking for numbers under 450,000 after dipping in the first week of January. Each week they came in much higher. The latest report was expected to dip from 483,000 to 465,000. The fact that it fell to 440,000, below the magic 450,000 was a real inspiration to investors by increasing the likelihood that we could see job growth in the February report. Remember, the expectation for January jobs was for growth of 25,000. However, when claims went back above 450,000, the reality set in that we lost 20,000 jobs. Therefore, as modest an indication as this may actually be, it was like a cup of warm cocoa for Wall Street.

Volume continues to be light as the break between the storms hitting the east coast offered little reason to make the trek to the office. Some areas were restricting traffic flow, making it more difficult to get into offices. In the meantime, the delay in economic news until today obviously kept the more timid bears at home. Stocks advanced, but after a rather conservative open. Therefore, we don’t have any gaps on an intra-day basis. The averages finished the day poised for the long list of economic reports piled up for today. The top report for the week is the January Retail Sales report. Expectations are for a gain of 0.3% versus a loss of 0.3% in December. The key here is inventory liquidation. January sales may end up being a disappointment because retailers did not slash prices like they did the prior year, when firms were stuck with huge excess inventories after a dismal holiday season. This year, companies kept their inventories very tight, so they didn’t have the merchandise to dump afterwards. I think this will produce a disappointing Retail Sales figure, especially ex-autos and gasoline. That number is expected to rise by 0.5%. That may be “optimistic” to say the least. Here’s the good news. Sales and profits are two different things. While I do think Retailers will face weaker gross sales, profits should be better than anticipated by the time we get close to the end of the quarter. We’ve got some time before that expectation becomes a reality, but it is something to keep in mind when viewing this report.

Also out today will be the energy inventory data. Weather will be an issue. Not only may it have boosted the drawdown in heating oil, but there may be disruptions due to travel that will have reduced consumption of gasoline. January and February inventory data could be skewed, and crude was acting like there was the expectation for a likely drawdowns that will aid in the bounce in the price of crude after slipping under $70 per barrel. There is a nice “double bottom” in place in crude (CL1 contract) at $68.59 in mid-December and $69.50 last Friday. Breaking these lows should set off trading stops with a downside target of $60, longer term. Initial support would be $65.05. Crude moved up off of this critical support ahead of the inventory data. Crude’s 10-week moving average is at $75.98. Crude traded as high as $75.69, challenging that resistance. If we move above that on the data, we could be in for a challenge of the $80 level again, short-term. There are a few other reports due out. December Business Inventories are expected to edge up 0.2% and the University of Michigan will release its preliminary February Confidence Index. Expectations are for a slight uptick to 75.0 from 74.4.

While not meaning to throw cold water on this technical bounce, we have to note that the indices are still trying to reach up to initial resistance levels. The Dow’s target is 10,270, the S & P is 1104 and the NASDAQ is 2200. It is positive to see the averages narrow the gap to resistance ahead of the economic data. One of the reasons why we expected the market to come under pressure in late January was because we always get past major market-moving earnings and year-end economic data in the first half of the month. It leaves a void of news flow that leads to seasonal profit taking. This year was made worse by the timing of the Greek debt crisis, but the fundament negatives just coincidentally hit at the same time the technicals were already raising red flags for a correction. By extension, this bounce isn’t likely the end of the bear story for this move. The further we go and the more overhead supply we can absorb, the better, but our expectation is for a close test of the recent low at the very least, and a lower low that takes us to the 10% correct at 1035 on the S & P. The focus right now is on the bounce. So far, so good. Today will test the bull’s resolve.