SP500 Daily Chart Update After a 27 Point Flush

The low at 1272 was set at 12:40 pm CT, a great time of day for setting a low that may be expected to hold up for the rest of the session. With that behind us, it is time to look back at the damage done on the daily charts after a 27 point selloff. Believe it or not, not much technical damage has been done. The flush could not take out the prior January 20 low, so there is no confirmation that the trend of higher highs and lows have been broken. Secondly, the monthly moving average is at 1277, and we can't be at all certain the mkt will close below 1277 today. Third, if we look back to April 26-28 last year, we saw a big flush on April 27 2011. January 28 2011 is April 27 2011 on the correlation map. Note how there was little downside follow through on April 28 below the April 27 low. Traders have to be aware that there may be little follow through on Sun-Mon depending on the spin created by economists about the forward looking data for the first week of Feb that will include ISM, ISM non-mfg, and NFP. The data in the first week of Feb gives us an initial look at the economic data in Jan. Consider the spike up in jobless claims throughout January as a bearish indication. Consider too the blizzards out East will have crimped economic activity in general. The early look at the Jan data may well disappoint investors next week, and that means regardless of whether there is little downside follow through on Monday next week, we could see significant downside follow through as the week develops. The Jan data released in mid-Feb should be weak month over month because of the blizzards. This is going to limit upside risks and increase downside risks into mid to late Feb. It is appropriate to point out that the blizzard related data in January will be non-recurring, so the Feb data when released in March should look pretty darn stellar and put the stock market back on its highs for the year. Bear that in mind as we muddle through the next two months of economic data for Jan-Feb.