12:40pm (EST)

We stayed up late last night to watch the European open after finishing up our chart work.  All of our homework suggests the market could make a big move this week, especially on Friday, but the direction is a little unclear.  Despite the rally last week, the market is still in a tight 4-week trading range but now we are back at the top. 

Futures were slightly higher at 2:30am (EST) when Bloomberg reported breaking news that S&P would downgrade 16 Spanish banks.  Dow futures were up 31 points and fell 2 ticks on the news.  At 3am, Spain’s GDP numbers came out and they were a train wreck. 

The reaction was mild for the first hour of trading but before we hit the rack, Dow futures had been cut in half so we felt there was a chance the market could pullback to start the week.

Spain is now looking at a “bad bank” plan as a way to avoid a bailout.  The country is holding talks to segregate troubled property loans into one or more asset management companies which would help struggling lenders.  Sounds like another short-term fix to a longer-term problem that isn’t going away anytime soon.  Spain is going to default but the market refuses to see it, right now.

Futures turned lower after economic news here at home came in worse-than-expected.  Before the bell, Chicago ISM for April fell to 56.2 versus expectations for a reading of 60.  Elsewhere, Personal Income rose 0.4% versus forecasts for a 0.3% increase.  Personal Spending was up 0.3% which was slightly higher than the expected increase of 0.4%.  This wasn’t really “good news” as consumers spent more on gas.  

As far as the indexes, the bears are trying to get them below key levels as we head into the second half of trading.

The Dow is down 34 points to 13,194 and below 13,200 while the S&P is slipping 7 points to 1,396 and has given up the 1,400 level.  The Nasdaq is off a double-deuce (22points) to 3,046 and is below the crucial 3,050 level.

We have a NEW TRADE we would like you to get into today and it is a CALL option on a stock we fell could explode in the coming months.  We have gone out to July to take advantage of a possible 500% return.

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