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Morning Matters:

Mid Week Update
by Geoff Garbacz

1.Continue to watch the impact of bankruptcies and mergers on the market. Acquisitions are happening every week and there have been no bankruptcies of note in 2010. This week MIL and TRA were bid for among others. Updated.

2.Unemployment numbers are due each Thursday and continue to slow bit by bit. Monthly numbers are due out March 5th. Pay attention to Jobless Claims each Thursday. The ADP number was reported on Wednesday and the results were muted. Updated.

3.Data shows that the economy is bottoming albeit at a moderate pace, in an inventory rebuild. Do not confuse the stock market and the economy. The stock market can do well when the economy struggles to get back on track. Updated.

4.Energy prices are range bound which a plus for stocks as taking less money out of the consumers pocket. Energy improving the past few days as the dollar rally has stalled here. Gold may be ready to make a run to $1200 and beyond. Updated.

5.The Dow Jones is now below 10500. Can 10500 become support again? The S&P 500 is now above 1100 while the NASDAQ Composite moves above 2200. Major support levels were reestablished in the past few weeks and now we need to see if they can hold. Updated.

6. The big question in 2009 was, "Can the S&P 500 take out its January high of 943.85?" Then we asked can the 38% retracement from the October 2007 high to the March 2009 low, 1014.14 be take out. Currently, this level has been successfully conquered. The next level recently became support again and then has struggled is 1121.44 which is the 50% retracement but it has failed and is a concern. We need to retake 1121.44 and look for this to happen this week. Updated.

7.Erlanger's EBB moves above 0. Weekly and monthly EBBs are positive. For daily readings we suggest you go to www.erlangerchartroom.com for hourly or daily updates. Updated.

8. December was another positive month for the S&P 500 and the Dow Jones Industrial Average. The only month that the market has struggled since March has been October. In 2010, January was a loser for the month with last week's action clinching that fate. February turned into a winning month after early weakness. March is a winner so far. Updated.

9.Semis and the SMH moved back above $26. As semis go, so goes the market. Semis are improving which is a plus for stocks. Updated.

10. Also as transports go, so goes the market according to Dow Theory. Transports remain strong. IYT is holding above $70. This is a plus for stocks and just barely $75has become support. Updated.

11.We are adding a new measure. How small cap names are doing against large cap. Small cap names had broken out since mid October but recently have given a neutral signal. The buy signal is fully back in force. Small cap is el feugo!!!

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