With no early economic reports in sight, U.S. markets Wednesday will keep their focus on Europe and the interplay between stocks, commodities and currencies.
Stocks could also continue the bounce that began Tuesday afternoon. "We were deeply oversold and we got the bounce. Now I think we have resistance overhead in the 12,600, 12,700 area on the Dow. I don't think this bounce is going to take us to new highs. It's possible tomorrow is an up day," said Paul LaRosa, managing director and technical analyst at Maxim Group.
Tuesday's markets took some wild turns, with risk assets sharply lower before an afternoon rebound. Stocks finished the day mixed, with the Dow at 12,479, down 68 in a move exaggerated by Hewlett-Packard's 7 percent loss on negative earnings news. (HP rival Dell , however, was popping higher in late trading Tuesday after turning in earnings that easily outstripped forecasts.) Get after-hours stock quotes for Dell here.
The S&P 500 slipped less than a point to 1328, and the Nasdaq was up almost a point at 2783.
The euro strengthened mid-session after it appeared that a Greek debt restructuring may entail lengthening the duration of its loans but not forcing a haircut that would hurt bond holders. The euro ended up 0.3 percent against the dollar, at 1.4233. That move supported risk assets. Oil was down $0.46 per barrel at $96.91 but it had been down more than 2 percent on the day at its low.
"If I was going to draw anything from this, currencies are suggesting that the dollar has possibly topped and the euro may be in the process of bottoming. It looks like the Europeans are proceeding along with the reprofiling" of Greek debt, said Brian Dolan of Forex.com. He said the next event he is watching for is an audit from the IMF on Greece.
Markets could continue to react to that situation Wednesday. "We'll see whether the market really buys the reprofiling or whether the market comes to the conclusion that all they did was kick the can down the road," he said.
The Fed's 2:15 p.m. release of its last FOMC minutes will also be an important factor, as investors look to see what type of discussion the Fed had about its strategy to exit its extraordinary policies and also how it discussed the economy and inflation. Oil inventory data is scheduled for release at 10:30 a.m. ET by the U.S. Energy Information Administration.
There are also a few earnings, including from Deere , Abercrombie & Fitch , BJ's Wholesale , Staples , Chico's FAS and Target .
Advance Auto Parts and Limited Brands report after the bell.
LaRosa said the S&P 500 finished just below the 1329 support level, but he does not see this market sell off as being similar to previous ones where buying the dip was a good strategy. "There's more charts topping out and going into bearish trends," he said.
"The way we've come down since the early part of May concerns me," he said. LaRosa said he does like semiconductors and REITs, but he does not like the commodity-related names or energy stocks.
"I think it's possible we're going to be up in the near term, but it's not a rally you put all of your chips in. You have to be nimble," he said.
Scott Redler of T3Live.com pointed out in a note that the SPDR S&P 500 ETF Tuesday cut through an uptrend line and its 50-day moving average, before reversing above it. "This type of bounce usually lasts a few days as we were very oversold," he wrote in a note.
As investors pulled money from risk assets, bonds have been finding buyers. The yield on the 10-year slipped to 3.118 percent, its lowest level since last December. Bond strategists expect the bond market to keep a positive bias for the time being, as weak data and the commodities sell off has sent investors into Treasurys.
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