By Barbara Kollmeyer, MarketWatch
After the worst start in history for U.S. stocks, some would look at the bright green lighting up futures screens this morning and say it’s about time. Not even another cut in the International Monetary Fund’s global growth forecast can spoil the mood this morning.
Gains come after the worst annual growth in 25 years for China has left investors stimulus-hungry, forks pointed at Beijing. Marc Faber says true growth there is 4%. That’s not to mention a growing frozen-Fed mentality out there after some recent soft data. The CME Group’s FedWatch tool puts chances of a rate hike in March at 31% (down from 50% a few days ago notes IBankCoin ), in April at 35% and 50% for June.
Meanwhile, it’s been hard to move an inch without some forecast about where this market is headed next. From big sell-it-all calls last week to the relaxed bulls over at Goldman Sachs, you might have thought everyone has had their say. But a few calls more have been spilling out, and they’re saying this market is due a bounce.
David Bianco, Deutsche Bank’s chief U.S. equity strategist, told investors in a Monday note that the next 5% move for the S&P 500 will be “up and soon.” He said he isn’t panicked by the recent slide in stocks because it’s being driven by a “a profit recession centered at certain industries caused by factors that we’ve long flagged as risks.”
Our call of the day is looking for a bounce too, but it comes with a warning: If you’re ready to leap into the next big rally, you’d better be ready for what’s to will follow. Yep, another pullback.
Our chart of the day takes a whack at oil as Brent floors it with some supersize gains. That’s as the IEA warns the oil market could “drown” in oversupply.
Key market gauges
Futures for the Dow industrials and the S&P 500 are taking off in a big way after Monday’s Martin Luther King holiday that shuttered U.S. markets, it not Globex. Helping out was a 3.2% Shanghai Composite /zigman2/quotes/210598365/realtime COMP +1.51% surge after that sluggish (for China) growth data. The Nikkei /zigman2/quotes/210597971/delayed JP:NIK -0.12% and other Asia markets rose across the board. After a plunge last week and no surprise on Iran sanctions being lifted, U.S. crude /zigman2/quotes/209724118/delayed CLH26 0.00% is back over $31 a barrel and Brent is closing in on $30, up nearly 5%.
Elsewhere, Europe /zigman2/quotes/210599654/delayed XX:SXXP +0.63% has a lock on that rally fever. Gold is off a little and the dollar /zigman2/quotes/210598269/delayed DXY -0.0029% is up against the yen.
The call of the day
Jonathan Krinsky, chief market technician for MKM Partners, says brace for a short-term bounce in the S&P 500. That’s after the worst start to the year in history may have winded the bears and sentiment indicators like the American Association of Individual Investors poll shows the fewest bulls since 2002.
He and his team doesn’t think the sellers are finished with this market, and are more interested in “selling a bounce than trying to catch one. In the “best-case” scenario, investors could see that S&P 500 bounce to near 1,900, but don’t expect it to move past 1,950, says Krinsky. On the downside, he says 1,820 and then 1,740 are likely to be tested in the coming months. Here’s his chart:
“With that said, we understand many clients must remain invested. In that regard, we would fight the urge to bottom-fish beaten-down names, and stick with those exhibiting relative strength,” he says. A similar sell-any-rallies mentality was expressed earlier this month by J.P. Morgan equity strategist Mislav Matejka.
Krinsky offers up 20 names that are above their 200-day moving averages, a chart level that many technical analysts watch closely. They include DreamWorks Animation , Popeyes Louisiana Kitchen , Allscripts Healthcare /zigman2/quotes/208834131/composite MDRX +1.47% , Dean Foods , Luminex and Universal Forest Products /zigman2/quotes/206543728/composite UFPI +3.03% .
It’s a light week for U.S. economic data. The only item on tap Tuesday is a home builder’s index due at 10 a.m. There will be no Fed speakers this week ahead of a policy meeting on Jan. 26-27.
Health insurer UnitedHealth /zigman2/quotes/210453738/composite UNH +0.11% reported early and shares are up. Morgan Stanley /zigman2/quotes/209104354/composite MS +0.33% is up 4% after swinging to a profit. Bank of America /zigman2/quotes/200894270/composite BAC +0.53% is up over 2%. as profit topped expectations.