Looking good this morning.

As of 8am, the Dow Futures (/YM) are at 25,386 – almost to our weak bounce line and the S&P Futures (/ES) are at 2,768, not at 2,775 but the Russell (/RTY) is back over the DOOM!!! line at 1,552, now 1,561 and the Nasdaq (/NQ) is actually over the weak bounce line (7,100) at 7,150 but AAPL is still warning us to be cautious at $219, still shy of it’s weak bounce at $223.50.

The bounce lines of our 5% Rule™ prevent us from running in and buying dips prematurely.   While we do love making bottom calls at PSW, it’s best not to do that when the entire market is down – as there tends to be no safe haven in a major sell-off.  While the S&P hourly chart looks like it might be moving higher, it’s really just a matter of having low expectations as the index has barly moved off the bottom and, since last Thursday, we’ve been making lower and lower highs – that’s more likely to be consolidation for a move down than up!  

The bounce lines tell us whether or not a move is real and, for the S&P, 2,775 is weak and 2,750 is strong (see Thursday’s Morning Report for how we got there) and, although we use a chart to illustrate it, it has nothing to do with those squiggly lines – it’s just math!  Math tells us 2,775 is the first inflection point and, other than a brief spike over on Thursday – we’ve failed at that line Friday and yesterday.  That’s NOT a sign of strength – especially when it’s the weak bounce line that’s failing…

When and if we take back 2,775, we’ll begin looking for the strong bounce line at 2,800, which has obviously been significant during the downturn and should be again if we begin to recover.  Once we are over the strong bounce, we can make bullish plays using that as a stop line but, until we are – it’s best to just watch and wait and gather more data.

Earnings Data is good this morning with Morgan Stanley (MS) and Goldman Sachs (GS) both turning in very good reports and…