B.J.'s Wholesale, Suntech Power and Ross Stores report earnings before the bell. The Limited reports after the bell.
Dollar Wimps Out
Weak dollar days have not translated into good days for stocks lately because of the seesawing reaction of commodities prices that tend to go with it. That trend was in place Tuesday, and could continue for a bit.
"Today was a very significant day for the foreign exchange traders, especially those who watch the charts. The dollar index had what's called an "outside" day which means today's highs and today's lows are both more extreme than yesterday's, with a close under yesterday's lows," said CNBC's Rick Santelli. "It is a key reversal."
In short, that means we could see some more dollar weakening. Brown Brothers Harriman, in fact, cautioned in a note Tuesday that the loss of momentum in the dollar could mean a deeper correction is coming before the week is over. "Dollar seems likely near-term to give up more of its gains on the week's failure to break 1.46 vs EUR and 1.85 vs GBP, but we continue to believe the buck will resume its strengthening trend," the note said.
Brian Dolan, chief currency strategist at Forex.com, said he expects a "slight correction into the end of the month, then fresh dollar strength coming back into September, when they put in the big positions for what they're expecting for the rest of the year."
"They're going to be hypochondriacal," Art Cashin said of Wednesday's stock market. "They'll be taking their own pulse and taking their own temperature. The bulls were counting on the uptrend line of the higher lows, depending on July 15 ... You're going to hear a lot of people talking about retesting the July 15 lows."
Cashin, director of floor operations for UBS, said he does think there's a chance those lows could be retested. "It depends on how many shoes fall in this financial area," he said. .
We have indeed been hearing a lot of talk about testing those lows.
Scott Redler, chief strategic officer of T3Live.com, is looking at that very question. He explained the market changed its trend Monday. "Once we broke the uptrend which was 1277 to 1282 (on the S&P 500), we changed our strategy and are looking for a potential down move to retest the July lows, in the low 1200 area," he said.
Redler said a few things will determine whether the market actually gets there, and he's watching closely the behavior of the brokerage stocks. He said he is particularly watching Lehman to see if it breaks through it's July low.
"We are watching to see if Lehman can hold the $12 area," he said. For Wednesday, he expects "the brokers are down and shorts are going to try to drive Lehman through the July lows, and if they do it successfully the market's going to have a horrendous day, but if people come in and support that level, the market's going to find a little bit of a footing and it's going to bounce around.," he said. If Lehman does fall through $12, it could dip into the single digits, which would be a big negative for the sector. (CNBC's Charlie Gasparino reports Lehman is looking to sell 70 percent of its investment management business.)
"You have the brokers looking like they can't hold up here," Redler said. He also spoke about a few other charts he's been watching. "To add fuel to the fire, the commodities seem poised for a bounce and tech seems to be running out of steam."
I will be away for a few days, returning with a new posting Monday night. Between now and then, watch for news from Jackson Hole Friday, where Fed Chairman Ben Bernanke speaks at the Kansas City Fed's annual symposium. Also keep an eye on Monday's existing home sales.
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