Contracting PMI Creates Hope

We're back to bad news being good news. China's PMI fell below consensus to 50.5 and Germany's PMI fell below 50 (contraction). While Asia had a bad night, Europe is doing great today, with the DAX up well over 1%. And that was enough to swing S&P futures from a 3 point loss to 8 points higher. Perhaps on hopes that Europe will ease.

I prefer to think that the market was in the process of going higher anyway. But it's instructive at times to find the narrative. Identify the narrative and you find the mood. Relief and hope are not constructive over the long term.

China got smacked pretty hard, so not much hope there (which ironically could turn out to be bullish). I'll have to keep any eye on it to make sure the 2000 level is not blown out, as that is my stop.

Everything in the S&P remains the same as far as levels go. 1570-1575 should be the target on the cash index today if futures hold up well. But volume continues to severely contract along with A/Ds, ticks, and new highs.

Should the internals get their say, not only would last week's lows be vulnerable, but 1500 too.