Wall Street's bears were trampled Monday, but traders say it's just a matter of time before they fight back.
Once more, the market's disbelievers were proven wrong. Stocks raced 3 percent higher, as commodities rose, bonds sold off and the dollar and yen weakened. Bulls found a variety of reasons for the big move, including the Indian elections; better-than-expected profits from Lowe's; improving home builder sentiment and positive analysts' comments on financials.
From 'Fast Money':
Going into Tuesday, traders say they are once more watching the technicals as the stock market continues to defy expectations. Financial stocks again led the way Monday, jumping more than 7 percent as shorts were forced to cover. "You know the expression: 'Don't be short a dull market.' That's what you had today," said one trader.
Stock futures had been lower Sunday night, but by Monday, a surprise catalyst for U.S. stocks became the election in India where a decisive victory by the Congress party-led coalition pushed Indian stocks 17 percent higher. The Congress Party won far more seats in India's Parliament than analysts expected, which now means India will pursue economic reforms.
On Tuesday, housing starts and building permits are reported at 8:30 a.m. Home Depot , archrival to Lowe's , reports earnings ahead of the bell, as does Saks . Hewlett-Packard reports earnings after the close.
Financials could stay in focus as J.P. Morgan Chase holds its annual meeting at 10 a.m. American Express should also be active after its late Monday announcement that it would trim 4,000 workers or 6 percent of its work force.
President Obama is set to announce plans for new national emission limits and mileage requirements for cars and truck, officially linking limits on greenhouse gases with federal standards on vehicles for the first time.
Traders Monday were closely watching a level on the S&P 500 between 905 and 909 to see if the market could break a key resistance level. The S&P finished at 909.71, up 26.83 points. Tim Smalls of Execution LLC said late Monday that the move had not yet been confirmed by the futures.
"906 to 909 on the futures is the resistance band. If we get above that, the next level would be 925," he said.
T3Live.com's Scott Redler said he's watching the 929 level, the high from earlier this month, now that stocks closed above his targeted level of 905/906. "GS (Goldman Sachs) is making new highs, and the potency of today's move should have gotten some bears to cover -- all they can hope for is a lower high in the next day or so," he wrote in an email.
Redler watches the market's technicals and moves on a short-term basis. Goldman Sachs is viewed as a key momentum stock and indicator of the top performers in the financial sector.
The dollar fell 0.46 percent Monday against the euro but gained 1.31 percent against the yen .
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"I think the currency markets are in the process of consolidating," said Meg Browne, currency strategist at Brown Brothers Harriman. She said the dollar could continue to trade lower against the euro, and higher against the yen overnight.
"I think the catalysts are going to be driven more by positioning and the technicals. The market will pay attention to the stock market. We do have some data but it's not first tier data," she said.
Commodities, meanwhile, rode higher Monday on the theme that the global economy is improving.
Oil rose nearly 4.8 percent to $59.03 per barrel on the NYMEX, and gasoline futures jumped 7.75 cents per gallon, or 4.6 percent to $1.7581.
Crude also was driven by other factors. "There's been a real pickup in (rebel) activity in the Niger delta so Nigerian strife and that Sunoco refinery outage are supporting things.. but we've also been keying off the equities market for some time," said John Kilduff, senior vice president at M.F. Global.
"The energy complex is out front, giving the economic recovery story every benefit of the doubt," he said. "It's (oil) been a barometer of market sentiment and a leading one at that."
Gasoline, meanwhile, has been rising at the pump. On Monday, it was at $2.309, up 6.9 cents in the past week and the highest level since early November. Kilduff said the low run rates at refineries has been pushing prices higher.
He said the mileage standards to be announced Tuesday by President Obama should not make an immediate difference in the energy markets. "If anything, we're keeping a closer eye on the emission issues and how that can impact refinery economics," he said. Kilduff said a clampdown on refinery emissions could hurt some smaller refineries and force them to close.
Treasurys lost ground as the stock market gained Monday. "I believe, despite the fact the Fed did buy $3 billion worth of Treasurys today, the market continues to look at forward supply," said John Spinello, Treasury strategist at Jefferies and Co, Spinello said the market is anticipating the billions in new issuance coming next week, when Treasury auctions 2-year, 5-year and 7-year notes.
"There's an absence of buying today. It's a short week and no work on Monday next week, so they're trying to come with corporate deals and they sell Treasurys to protect the rate," he said. Selling in the 10-year pushed its yield higher, to 3.211 percent.
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