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world stock market, us stock market
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6/30/09 Investment House Alerts
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts: None issued
Buy alerts: GENZ; IDTI; NFLX; TEX
Trailing stops: None issued
Stop alerts: AN
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VIDEO MARKET SUMMARY
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We are offering a video market summary featuring Jon Johnson talking about the market, the economy, and what is next for investors. We hope you enjoy this added feature to your subscription! We still include the normal Market Summary format so you have both a video to listen to while commuting or multitasking as well as the written report for review.
TO VIEW THE VIDEO MARKET SUMMARY CLICK THE FOLLOWING LINK:
http://investmenthouse1.com/ihmedia/marketsummary.wmv
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SUMMARY:
- Waning consumer confidence ends quarter on a sour note.
- Case/Schiller Home Price index doesn't set a new downside record for once.
- Chicago PMI shows some improvement, bringing the regionals more in line.
- Consumer confidence mirroring the decline in national polls on federal policies.
- New money may provide a first of quarter bump, but will the money last?
- Sellers moved in quickly on NYSE as the bad news hit and that indicates the pre-quarter end selling resumes.
- Liquidity remains in control as market trades in its range.
Consumer confidence undercuts any last minute window dressing.
The quarter ended on a sour note as consumer confidence undermined any last-minute window dressing planned for the last day of June. The market started higher with the Case/Schiller housing index not posting a new downside record. It fell a mere 18.1%, though that was lower than the 18.7% and new record hit the prior month. Over the last 3 months the Case/Schiller home pricing index in the twenty largest metropolitan centers in the country has mitigated some suggesting a slowing in the housing price decline. That is good - prices needed to come down, and they have done so and as we talked about last night. The problem now is not getting people interested in houses, it is getting loans to people who want to buy them. If you are not going to live in the house and you do not have a lot of money to put down, then you are not going to qualify. The US is in a recession and a lot of people either do not have jobs, they are worried about their jobs lasting, or their incomes are down. They may not have the money to put down on a house. As housing has led us out of every recession - at least the last 7 recessions - it is kind of important that we get buyers with the ability to qualify for mortgages. That means the Fed has to get on the stick some more and the federal government needs to get some policies that actually work versus the nonsense that they have been putting out so far. We will see how that shakes out, but as we have reported time and time again, we are heading down the same path the US went down in the 1970's. It took ten years to get out of that mess along with some major economic changes brought about by Ronald Reagan and a move back toward free enterprise and capitalism in America. We are moving the other way right now. The pendulum is swinging away from capitalism, free enterprise, and less regulation and going toward more regulation and, frankly, more socialist policies when you look at healthcare. Regulation is not necessarily a bad thing in and of itself. We have to have clean water and clean air - we were polluting ourselves out of existence in the 60's and 70's, so we had positives result out of that regulation. We have to hit the happy medium, however, and unfortunately we are going beyond that because, as I will say again and again to anyone who will listen, our policies right now are very much the same as in the 1970's when we strangled business and entrepreneurs.
It was not all doom and gloom. The Chicago PMI (the regional manufacturing index for the Midwest) was better than expected. A whopping 39.9. That is not great; 50 is the threshold to expansion or contraction. Though that was better than the 34.9 registered in May, it was still quite weak. The real problem for the market, however, was consumer confidence; that was the rub again. Confidence fell to 49.3 instead of the 54.8 on the prior period and the 55.3 expected. Experts thought things would get better, but they did not, and people are less confident now.
Stocks were up into the number, they rolled over after the number came out and by the end of the day, even though they tried to bounce, none of the indices closed positive outside of the SOX, and it barely broke positive itself. We looked for a rather quiet end of the quarter with maybe some more window dressing, but that consumer confidence number ended any idea that big funds or smaller investors were going to buy, and they all decided to avoid the Christmas rush and actually started to sell stocks.
Oil reversed after hitting a high for this expansion of $73 overnight. It closed $70.10, down $1.39 but still over $70. The thing is we had an overnight reversal. That may not seem like much, but remember when SP500 tried to break over the January peak at 944? It made the break intraday, then reversed that same session, and after that it was never is same. It started to sell off and went back down until last week it got close to 875 on the low. So we had that swing from 944 down to 880+, and that was the result of that inability to hold a break. The sellers came in and pushed it down as it was not its time to hold the break.
This may not have been oil's time either. Remember, oil has been going up even though demand is still down at recession levels from 2001. So we do not have demand pushing it - it is basically speculation and, as I reported yesterday, China is hoarding more oil. It wants to increase its reserves 160%. We know China will keep hoarding, but still that is not going to make up for the rest of the world struggling through a recession that is going to last quite some time. Thus the price of oil does not really correspond to demand. Therefore, if we see this kind of rollover that could mean that oil has had a pin prick its bubble and it could drain out all over the ground now, lose price and fall below 70 - or in fact well below 70. That remains to be seen, and we will watch how these reversals play out. Given the circumstances, that could prove to be very interesting. We have had worsening economic numbers as well as a rise in oil that is not based on any demand. I think I have beat that horse into the ground, but you get the picture.
The dollar strengthened somewhat - it closed at 1.4023 Euros, better than the 1.408 on Monday. Pre-market, it had ballooned up to 1.4125 Euros, so there was quite a nice recovery intraday and that helped bring oil back in, though the dollar was stronger as oil hit $73 overnight. As we noted last week, oil and the dollar, while they are somewhat correlated still, are not as tightly bound together right now. There are changes going on, some undercurrents with prices that do not really match demand, and I have a feeling it is going to try to sort itself out over the next several months.
TECHNICAL.
INTRADAY.
Intraday started positive - a soft start that moved positive, but then the consumer sentiment numbers took the starch out. Stocks fell down mid-morning, moved laterally for the rest of the day, and in the last two hours made a bounce. They cut the losses about in half, but then in the last 15 minutes they ran into choppiness. The sellers came back in and knocked them back down a little bit and that kept everything easily negative except for the SOX, which closed with a massive 0.0 9% gain. Really big moves there - but the fact is it did manage to make it to positive, so there is some underlying strength in technology and the semiconductors.
INTERNALS.
Internals matched the session, about -1.3: 1 on the breadth, what you would expect. Volume rose on both the NASDAQ and the NYSE. It edged higher or NASDAQ, but it really made a significant move on the SP500. From yesterday's $1B close, volume rose almost 25% on the NYSE to $1.32B. That is still below average, but it is getting up closer to average and indicated there was actual selling. We saw some window dressing again on Monday that pushed the financials up; they were back down on a little stronger volume on Tuesday. They were bought up ahead of the close, ahead of the end of the quarter, but were sold off right at the end of the quarter. That will not show up necessarily on the quarter-end prospectus because there is a three-day clearing period. They can effectively say that they really did not have those at the end of the quarter if that is what they want to say (or, more precisely, they could say they had not sold them at that point because they were still in the portfolio by the end of the quarter).
CHARTS.
There was no real change. It was another day of SP500 at resistance, remember it came up, bounced, then came down from the January peak and is now trading around 920. It cannot get over that level of 920-930. It hit at 930 and that is what stalled it on the high as it closed down at 919, back down near the 920 level. There is resistance in this entire range punctuated about every ten points.
NASDAQ still holds its breakout, the one real positive in the market. It broke higher, tested, gave up the initial breakout over the November high, but it held in its range and bounced back up. It has not made any new highs on the move, but given the market, given that it is the end-of-quarter, given it is summer, and given that SP500 is trying to find itself here in the middle of its range, that is not bad action. It is showing some really good leadership. The SOX finished slightly positive. There was no major move there either, but it moved laterally for the third day. It was over some support and trying to make a higher low and set up a move higher.
Right now we are not expecting breakouts one way or the other. Even if some new money comes in Wednesday to start the third quarter, we do not expect there to be breakouts as a result of that. The money will come in, there may be a push back up a little bit, then it will run out and we are back to where we were, consolidating in the range. The best we can look for right now is the range trading, in other words, consolidating better inside the range. If you are looking for upside that is not necessarily bad, it is just a matter of when it is going to end. As we talked about yesterday, that gives us trades both ways. We can play the upside or the downside of the range. If we get a breakout, we can let them run, and if we get a breakdown we can let the downside run. We have to realize we are in a range, so should consider taking profits when we get down to the bottom of the range, not only in the indices but in the individual stocks we are playing as well.
There is some promise on NASDAQ and SOX if some new quarter money comes in, but we are not anticipating a breakout. Longevity for any such move is key. After the money is gone what happens then? The talking heads have the song - what will we do after the money is gone? When you have a new quarter and the money comes in, you can get that rush that feels great with fresh money being put to work. There still is a lot of liquidity out there, and though that money will be put in, will it be able to hold the gain or will it need some Viagra? Frankly, even Viagra will not work given that we are in the two weeks surrounding July 4th and the only thing popping is fireworks. Stocks tend to get mired around this holiday, but it is not too bad because the overall bias is still upside as the indices, even SP500. It may not be in that trend off the March low, but it has made a higher low over the past week and has established an intermediate uptrend (though not at the same angle as the March uptrend). There is still an upside bias in the market and that makes sense given all the printing presses at work around the world still pumping money into the markets. Investors are still trying to make sense of it all. There has been some counter-news such as the G8 saying it would withdraw some stimulus and today one of the Fed governors saying we need to consider how we are going to withdraw the stimulus when we get there. That kind of undermines the idea that the money is there and the bid will stay there. The bid has remained in place. Stocks are going up and down in their range, but they are going up and down in a range - that is the point.
LEADERSHIP.
Financials were up on Monday but down on Tuesday - they could not keep the pace. You see a lot of bifurcation in the market even in the same sectors. We have been noticing this a lot lately. The restaurant stocks look great, but then some restaurant stocks look bad. Some semiconductors continue to move up looking wonderful while others do not look that great at all. Some are breaking down, some are moving sideways, some are moving higher.
The Chinese stocks have every reason to go up, do they not? China, after all, has its grand stimulus plan that is actually working - its economy is moving higher, so its stocks should be moving higher. They are but then they are not. SOHU and NTES shot higher last week and then they tumbled back down on Monday. They got a bid, then they lost it - not only that, but they had some selling on it. At the same time, other Chinese stocks are running higher. CTRP and MR are moving right on up. We are going to see if we can catch some of these others if they catch a bid again because actually, some of these pullbacks on Friday where they tumbled back down were a function of this window dressing. Some were sold off in favor of some of the other large cap household names that people like to see in their mutual funds. We are going to watch for them and see if we can get a bid back in them. If we can, we might get some stocks that can move and cover a lot of real estate in short order at a pretty decent price. There are some not too bad patterns so we will look there again.
The them here is there is a lot of bifurcation among stocks in the same sectors. Stocks within sectors cannot figure out which way they want to go, which makes some sense given that the market and the indices overall are moving laterally, consolidating and trying to figure out which way they want to go. SP500 remains in an uptrend but too still cannot figure out whether it wants to come back and test 875 or 850. We'll have to see what leaders step up- I am afraid it could be several weeks to a couple of months to figure out just what will happen here. There are some great stocks that are moving up - CTRP, ICE, MR, CELG. A lot of stocks are in great position and started moves, but they have not really put a good move in for us yet. They are still in solid shape, but they need the market to continue doing what it is doing. Recall as the market has consolidated they have set up and started to move up well. As long as the market continues to consolidate, they can put in what might not be a huge move, but a move we can bank some gain off of and see if they can make a breakout.
As for the downside we still see them as well. We have stocks such as AKAM, GENZ and TEX. They look good for the downside and can make money there even as the market sorts out what it is going to do next - whether it slides down to test the bottom of the range or bounces up to test the top of the range again. We could get a breakout either way, and it could come at any time if some news hits. Right now we are in that slow, "two weeks around Independence Day" trade that keeps the market in some molasses. We anticipate (although a new quarter can change anything) that we see the same kind of up and down movement though kind of slow and in molasses.
THE ECONOMY
Chicago PMI joins ranks with other regions, but all are still too low.
The Chicago PMI is an important number. We always watch the regional manufacturing indices as a precursor to the national ISM, which comes out on Wednesday. Indeed, they are broad indicators for the rest of the market. Chicago PMI is up two out of the last three months. 39.9 in June, 34.9 (some backsliding) in May, but a 40.1 reading in April - so it has shown improvement. It is trying to turn, but it is still at a terrible level. Remember, back in 2002 in October and the months following that, the regional PMI reports had turned positive before the economy did and we knew that with that combined with the good patterns we saw in semiconductor stocks and some of the retail and internet stocks that we would have a break upside even if it was just a solid, sharp, bear market rally. It turned out to be more than that, but that is the kind of stuff you look for to see if there is going to be something more substantial than just a bounce higher. We are not getting the same kind of improvement in these regional reports. They are slowing down the drop and actually trying to turn. Chicago's report this month adds it to the list of the others that have tried to make a turn back up, so that is a positive. That is a long way from being recovery and we have talked about that ad nauseam over the last few months.
There are some interesting facts associated with this report. The six-month average is still 35.6, and that pretty much sums it up. New orders were up. 41.6 versus 37.3 in May. Backlogs rose to 37.6 from 26.3, and that is a solid surge - people are ordering stuff. There is not much manufacturing capacity right now, a lot of it has been idle, and therefore you get backlogs quickly. The question is can they resolve those - and do they WANT to resolve those - in other words, do they anticipate a turn higher in the future that would warrant tacking some manufacturing processes out of mothballs? That is the tricky part here. The government needs to provide some kind of stimulus to get manufacturers to produce and to get businesses to buy when there is no real desire or need to buy. What happens if you suddenly get a surge in demand from demand-side stimulus? You get bottlenecks because there is a lot of supply that is not ready to come online and meet demand. So you have a lot of demand, a lot of dollars because we have a ton of liquidity out there. If demand jumps, we have demand and money chasing a finite or even smaller amount of goods. Look it up in your economic textbook - that is classic inflation and that is why we have always had a problem with this demand-side stimulus that the current administration is trying to push. They always want demand-side stimulus, but historically that leads to slowing recovery and inflation versus supply-side stimulus. Supply-side has got a bad name, but history shows it works.
The bad part of the Chicago report was that inventories rose to 34.2 from 31.5, and prices jumped to 36.3 from 29.8. Of course you know what that is gratis - the oil and energy prices moving higher. Oil was up 45% in Q2. When it rises that much, you are going to see your prices go up because we import so much of it. Yes we need to get off of it, yes cap and trade may be able to help us spur the kind of invention we need to do that. T. Boone Pickens thinks it is a great idea, but of course he thinks wind is a great idea. Frankly, the most wind I think we get out of T. Boone is what is coming out of his mouth of late, but he is a lot smarter than I am and has made a lot more money in the oil market than I have, so what he says you kind of have to go with - at least that is what the administration and other people are going with.
Confidence shows impact of disenchantment with federal government's policies.
We saw a significant decline in consumer confidence that helped undermine the market's early gains on Tuesday. What we are seeing is not really a surprise. Everyone expected consumer confidence would continue higher because that is what it does once it turns. The problem is we have a lot of other issues coming to the floor now besides the market. One of the problems that we are having is that we have issues with the federal policies. The numbers for Congress and the numbers for the administration as far as acceptance of the policies have been plummeting. There is a new Rasmussen Report out today that shows that the people that strongly approve of the economic policies of the administration and Congress are at 31%, and those that strongly disapprove are at 33%. That is considered a negative reading and it is the third such negative reading in the last ten days. We are having a lot of issues come up with respect to what is happening on the federal policy level as far as spending money. A lot of people have an issue with that because everyone has to tighten their belts at home, they are worried about their jobs, but there is just what they consider profligate spending going on in Washington. That is reflected in the consumer confidence polls that see the present conditions down to 24.8 from 29.7% and expectations down to 6 5.5% from 7 1.5%.
The jobs outlook fell and expectations of any wage increase were laughingly dispelled as they fell as well. The inflation expectations remained strong: 5.9% this month, 5.6 the prior, 5.9% in April, and 5.8% prior to that. What we are seeing is the consumer confidence report is registering a lot of disenchantment with the administration and Congress's spending and stimulus plans as well as just the outlook with respect to the stock market.
Of course what is up now is the health trade issue. There are issues with healthcare. We were laughing today because there were some comments about what we are going to do with healthcare. The government that gave us the food pyramid, the pyramid that has carbohydrates here, and meats at the top. It gave us the food pyramid and it really works. What is done is create a nation of people who are shaped just like the food pyramid - wide at the waist, narrow at the shoulders and diabetic. We have a bunch of obese diabetics with heart trouble in the United States, and that is what the food pyramid, promulgated by the federal government, has given us. If we are going to go to a national healthcare system, maybe we ought to also invest in creating come cordon bleu education restaurants here in the United States and eat more like them. They have socialized healthcare, but they do not have the heart disease that we have - they drink more wine, eat more oils, that type of thing. They still have butters and fats, but they just do not eat as much as we do. They have a different pyramid in France than we have here in the United States and, lo and behold, their people are shaped like their pyramid as well - but it is not really a pyramid, it is more of a rectangle in France. My suggestion to the administration is, if we are going to have national healthcare, let us change our food pyramid as well and change it to a food rectangle perhaps - then maybe cost will come in. I digress as usual so let us move on.
THE MARKET
MARKET SENTIMENT
VIX: 26.35; +1
VXN: 26.69; +0.22
VXO: 24.79; +1.04
Put/Call Ratio (CBOE): 1.08; +0.3
Bulls versus Bears:
This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.
Bulls: 43.6%. Down from 44.8% as the choppy market is still culling the herd some. Fading from 47.7% it spiked to up from a low of 42.5%. Broke free from the 40.9% where it hung around for three weeks. Steady rise from 36.0% just 8 weeks back. Has passed 43.2% hit mid-April before anticipation of stress tests. Over the 35% threshold, below which is considered bullish, but this is not a bearish indication yet. Has to get up to the 60% to 65% level to be bearish. Dramatic rise from 21.3% in November 2008, the bottom on this leg. This last leg down showed us the largest single week drop we have ever seen, falling from 33.7% to 25.3%. Hit 40.7% on the high during the rally off the July 2008 lows. 30.9% was the March low. In March the indicator did its job with the dive below 35% and the crossover with the bears. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.
Bears: 28.7%. Up from 26.4% and 23.3% the week before. Still well off the 37.2% and the 37.1% in mid-April as the rally continued higher. As with bulls, below the 35% threshold considered bullish and starting to approach bearish levels (for the overall market). Now far from off the high on this run at 47.2%. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.
NASDAQ
Stats: -9.02 points (-0.49%) to close at 1835.04
Volume: 1.992B (+0.17%)
Up Volume: 787.026M (-457.829M)
Down Volume: 1.252B (+509.155M)
A/D and Hi/Lo: Decliners led 1.28 to 1
Previous Session: Decliners led 1.23 to 1
New Highs: 32 (-29)
New Lows: 8 (-8)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
NASDAQ continues to be the golden child of the market. It holds it is breakout - tried to give it up but it held its range of support and bounced again after it made a higher low. It has not been able to take out the June peak and has lost some momentum on this bounce, there is no question about that. It may make a lower high here, but it made a lower high earlier and recovered nicely from that. That is what happens when an index or market consolidates. We are likely to see a bounce around some between 1774, the May level, and 1786, the November peak, as it continues to consolidate. If we get a rush of money coming in tomorrow it may even bounce up toward that November peak, but as with SP500 we think that once the initial surge of money is gone it will come back down and continue testing in this range. That is just the way it is for now. It is summer, we are around July 4th, and there is an upward bias so they are not selling it off. We will see if that remains but the liquidity is still out there helping to prop things up.
Remember this market is unnaturally high right now. Sure it had a tough selloff in the fall after Lehman came out in September and the market imploded and everyone panicked about the Great Depression. So it has had a reflex bounce in the 30-35% range. That is normal, but it should not be holding up at these levels given the rather pathetic economic prospects down the road. What is holding it up is all of the money that is out there. For now, that is doing the trick, but whether it will lead to a new breakout remains to be seen. If the stimulus is withdrawn and there is no economic improvement, then the market will fall - that is pretty much the bottom line right now. That is why the market bucked and faltered the past 2-3 weeks as the G8 floated out the prospect that it might withdraw the stimulus. If they actually do take the stimulus it will fall because there is not enough economic improvement to support a further market advance. Again, that is the bottom line and that is why we continue to watch and make sure that the liquidity is still there.
The Fed has indicated it is not going to back off and it knows it cannot back off. Bernanke is a student of these things; he knows that to remove the monetary stimulus at this point would be devastating for the financial markets. The Fed is not going to do it, but the question is whether the rest of the world is going to stay the course right now. The problem is, if you stay the course you have to worry about inflation. We are not getting the kind of growth that we need because the policies are not going to produce that kind of growth, so we have to worry about the rise of stagflation. That is what Europe is worried about - the mandate of the EU central banks is to avoid inflation. They are not allowed to consider maximizing potential growth while trying to minimize inflation as with our Fed. It is a balancing act here, but there they only have one leg, so keeping them on the course is going to be more difficult.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: -7.91 points (-0.85%) to close at 919.32
NYSE Volume: 1.328B (+24.61%). Some distribution on the NYSE indices. This indicates that the pre-quarter end and Russell action is getting ready to resume. SP500 was in trouble and heading to 875 when that trade started. The higher volume selling Tuesday as soon as some bad news hit indicates that can be the case.
Up Volume: 401.359M (-305.969M)
Down Volume: 900.954M (+550.727M)
A/D and Hi/Lo: Decliners led 1.41 to 1
Previous Session: Advancers led 1.7 to 1
New Highs: 28 (-2)
New Lows: 50 (+1)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP500 remains at a key level at the May peak at 930. This is where it has come back to after it failed the breakout over the January peak at 944. It came down, almost tested the 875 support level, then it has bounced right back up. Remember it rolled over on that breakout, so it needed to come back and consolidate and it is doing that. As we noted at the time and many times since, an index or stock will fail the first breakout attempt, and so it did. No it has set up a higher low and is trying to maneuver its way back up. Will it do it or not? It has not tipped its hand yet. It is keeping an uptrend in place so you can expect that it will attempt to maintain a higher low. We will see whether it will it be successful or not when the new quarter comes. I think it may come back down, but what I think does not really matter - it is what the market does that counts. There is still a lot of liquidity moving into the market, and it is getting close to the point where it is going to try a break. You can only go sideways so long before you try to move.
Last week it tried to come down to support and then it made a higher low. Now maybe we will see more of a bounce higher if some new money hits the market on Wednesday, but after that, I think the market will resume the trends that were in place before all the window dressing and Russell rebalance, which means we may get another test down toward 875. That is not a bad thing. That is just continuing the consolidation and upside bias that the market is showing and SP500 in particular.
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
Stats: -82.38 points (-0.97%) to close at 8447
Volume: 233M shares Tuesday versus 216M shares Monday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
WEDNESDAY
We could get some new money in the first quarter. There are the ADP monthly jobs report, the ISM index, pending home sales, construction and crude oil inventories. Earnings are starting to pick up as well - the APOL group today announced a nice day and had a good bump. The market is becoming more news-driven, evidenced by the consumer confidence reading today. It killed an end-of-the-month window dressing rally. It is pretty strong stuff when the news starts to take over is it not? The end of the quarter trends are starting to wind down. We saw it end when the consumer confidence came out with respect to the window dressing. The Russell rebalance is over, so now the market is going to look to liquidity and earnings. We are going to have warnings coming out. I think that is one of the reasons there could be a pop up - if some new money hits we could easily see it come back down after that. What to do? If we get a nice move on some plays, then take some gain off the table. We have a lot of new plays that have not had much chance to build in a lot of upside cushion and we will have to watch them. They can bang around in this trading range and be just fine. We have tried to take positions low in the range so we can have a good risk/reward position where if they break down we can exit with minimal losses. We have been trying to avoid taking them after they have moved up so we do not get caught in that position of having to come back on and try to decide whether to ride it to the bottom of the range, and then if it breaks out we are in deep doo - or do we just cut our losses here? What we are doing is trying to take it at the bottom of the range, and then if they break down, we can exit them. If there is a move up again, we will look at taking gains off of that, and will also look at taking some downside positions. We can get this movement inside the range that can still give us great plays upside and downside and we will take add advantage of those the best we can.
There is an old adage that says that bear market rallies tend to die on low volume. We have had pretty doggone low volume over the past couple of weeks. NASDAQ showed some better volume on the upside, but its volume has tail off as well. Pretty much below average except for the Russell rebalance which of course unnaturally inflated the trade levels. So what we have to worry about is whether or not the old 'L' word - liquidity - is going to trump whether or not a low volume bear market rally rolls over. Even if it rolls over, maybe I am totally wrong and it will not crash back down. There is a pretty well-defined trading range that has held up. As long as liquidity is out there, the trading range should hold. Maybe it does not break things to new highs right now and maybe it will take an announcement of better news or a better type of stimulus to break them out of these trading ranges. If the liquidity remains - if the world central banks keep the money in the world financial markets - then there is a floor in these trading ranges under the world markets. They are not going to be able to come back if they keep flooding money in there. Eventually it runs dry; it cannot run forever.
The big question is when does it all end? We are still pretty early into the rally. It is consolidating the gains. It has done a nice job of consolidating the gains - remember I felt like the market should have rolled back down versus holding so high in the trading ranges. It is a testament to the strength of the liquidity from the monetary policies that they have not done that. Right now I am still anticipating that the liquidity keeps the market propped up in these trading ranges. Yes they will bang around in them, but I do not foresee them breaking down as long as the liquidity stays there. That means we will keep looking for opportunity, but will look for it when we get a good buy on it like I was talking about with some of these Chinese stocks that got hit hard on Friday and are still down this week. They may give a bounce-back play on them because they tend to move quite rapidly. That is nice to play inside of a trading range.
You have to be a little vigilant with your plays and try to pick them at the point where you get them off of the support level off of the bottom of the channel so you have a good risk/reward position. Then when you get to the top, you think to take some gain. It may not be the nice, huge gains that you like to take on them, but we take some of the gain and then see if they can make a breakout. If not, then we make a decision whether we want to keep the play and let it ride down or go ahead and take it all off the table, let it ride down and see if we can pick it up again or try something to the downside. That is the nature of a trading range and that is the nature of the market we have. We will take what the market gives us, but will just try to pick the cherries - we are not trying to take everything and see what we can come up with until the market makes a more definitive move.
I will have another report this week and one over the weekend. On Thursday I might abbreviate a little - give the staff a little time off because we will have a three-day weekend. This is just a very slow two weeks of the year. I will try to get some choice plays, give you the lay of the land, and then we will hit the market from there for next week. Have a great evening.
Support and Resistance
NASDAQ: Closed at 1835.04
Resistance:
1880 is the June peak
1897 is the October post gap intraday high.
1947 is the October gap down point
1984 from late September
2099 is the mid-September low
2169 is the March 2008 double bottom low
Support:
The 18 day EMA at 1813
1786 is the November intraday high
1780 is the November 2008 closing peak
1773 is the May intraday peak
1770 is the mid-October interim peak
The 50 day EMA at 1756
1716 is the May closing high
1673 is the prior April peak
1666 is the intraday January 2009 peak
1664 is the May 2008 low
1661 is the April 2009 prior peak
The January closing peak at 1653 (intraday)
The 200 day SMA at 1641
1623 is the early April peak
1620 from the early 2001 low
1603 is the December peak
1598 is the February 2009 peak, the last peak NASDAQ made
1587 is the March 2009 high is getting put to bed again
1569 is the late January 2009 peak
1542 is the early October 2008 low
1536 is the late November 2008 peak
1521 is the late 2002 peak following the bounce off the bear market low
1505 is the late October 2008 closing low.
1493 is the October 2008 low & late December 2008 consolidation low
S&P 500: Closed at 919.32
Resistance:
930 is the May peak
935 is the January closing high
944 is the January 2009 high
956 is the June intraday peak
1000
1050
Support:
919 is the early December peak is bending
The 10 day EMA at 917
The 50 day EMA at 901
899 is the early October closing low
896 is the late November 2008 peak
The 200 day SMA at 891
888.70 is the April intraday high.
882 is the early May low
878 is the late January 2009 peak
The prior April peak at 876
866 is the second October 2008 low
857 is the December consolidation low; cracking but not broken
853 is the July 2002 low
848 is the October 2008 closing low
846 is the April peak
842 is the early April peak
839 is the early October 2008 low
833 is the March 2009 peak
818 is the early November 2008 low
815 is the early December 2008 low
805 is the low on the January 2009 selloff. KEY Level
800 is the March 2003 post bottom low
Dow: Closed at 8447.00
Resistance:
8451 is the early October closing low
8521 is an interim high in March 2003 after the March 2003 low
8588 is the May high
8626 from December 2002
8829 is the late November 2008 peak
8934 is the December closing high
8985 is the closing low in the mid-2003 consolidation
9088 is the January 2009 peak
9387 is the mid-October peak
9625 is the October closing high
Support:
8419 is the late December closing low in that consolidation
The 50 day EMA at 8390
8375 is the late January 2009 interim peak
8315 is the February 2009 peak
8307 is the April 2009 intraday high
8221 is the May 2008 low
8197 was the second October 2008 low
8191 is the prior April peak
8175 is the October 2008 closing low. Key level to watch.
8141 is the early December low
The early April intraday peak at 8113
The early April peak at 8076
7965 is the mid-November 2008 interim intraday low.
7932 is the March 2009 peak
7909 is the early January low
7882 is the early October 2008 intraday low. Key level to watch.
7867 is the early February low
7702 is the July 2002 low
7694 is the February intraday low
7552 is the November closing low. KEY Level.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
June 30 - Tuesday
Consumer Confidence, June (09:00): 49.3 actual versus 55.3 expected, 54.8 prior (revised from 54.7)
S&P/Case-Shiller, Apr (09:00): -18.1% actual versus -18.63% expected, -18.70% prior
Chicago PMI, June (09:45): 39.9 actual versus 39.0 expected, 34.9 prior
July 01 - Thursday
ADP Employment Change, June (08:15): -363K expected, -532K prior
Construction Spending, May (10:00): -0.5% expected, 0.8% prior
ISM Index, June (10:00): 44.0 expected, 42.8 prior
Pending Home Sales, May (10:00): 1.1% expected, 6.7% prior
Crude Inventories, 06/26 (10:30): -3.87M prior
Auto Sales, June (14:00): 3.3M prior
Truck Sales, June (14:00): 4.1M prior
July 02 - Friday
Nonfarm Payrolls, June (08:30): -370K expected, -345K prior
Unemployment Rate, June (08:30): 9.6% expected, 9.4% prior
Hourly Earnings, June (08:30): 0.2% expected, 0.1% prior
Average Workweek, June (08:30): 33.1 expected, 33.1 prior
Initial Claims, 06/27 (08:30): 627K prior
Factory Orders, May (10:00): 0.2% expected, 0.7% prior
End part 1 of 3
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