Monday, April 25, 2011

Stocks Continue Their Rally

SUMMARY:

- Stocks continue their rally, giving us the moves we want but still below the February peaks.
- Strong earnings and guidance offset another week of 400K jobless claims and a tumbling Philly Fed manufacturing report.
- Leadership is across the board but financials are holding SP500 back at a critical point.
- Can earnings and a decent technical pattern push stocks through to the other side?

MARKET SUMMARY

Good earnings overcome so-so economic data and rally stocks as per the plan.

Stocks did what we wanted them to do to close out the week ahead of the three-day weekend. We were looking for a move up toward the February peak, and they more or less did that. SP500 gapped higher and rallied to the March peak. It could not go beyond that. NASDAQ gapped just past its March peak and into the gap zone from the downfall off of its February peak. We hoped to get this high and cannot complain. It got close enough. We were taking some profits on the day because we got what we wanted. It would have been the height of foolishness not to after we got what we wanted and said we would take profits.

The interesting thing is that the market did not take profits overall. There were a couple of points were it looked like it might sell off. It gapped open and then sold off a bit. Then it tried to sell a couple of times in the afternoon session. The sellers simply were not strong enough. Volume was a bit lighter, but not pathetically light. Stocks managed to rally in the last half hour to close right at session highs whether it was on the SP500, NASDAQ or what have you. It was a good two-day rally to end the week. NASDAQ, +0.6%; SP500, +0.5%; Dow, +0.4%; SP600, +0.7%; SOX fell 0.05%; NASDAQ 100, +0.8%. NASDAQ 100 was leading the way higher with AAPL's earnings and many other big-name techs performing well on their earnings results.

It may have seemed fairly easy with some of the big-name large caps leading the way. AAPL gapped higher on its earnings. We took some gain off of our more recent position in it. BIDU did not move up. It has been moving higher, and we decided to bank some gain there. We had a big option trade and we took a little off the table. BWLD was not necessarily racing to the upside, and we took nice gain there. We just were picking and choosing throughout the market. We took gain on LULU as well in one of our late positions. PLXS was up big on its earnings results. SCSS bolted to the upside with a huge 30% gain on the session. Now we have something like 90% gain built into our stock position on that play. Cannot complain there.

We even took some gain on TITN because it had a great week. Then it did the old gap-higher-and-reverse routine. Did not quite hit our target, but it was ripe. We took some 18% stock gain and 90%+ option gain on that. Even though it did not hit our target, it showed indications that it might try to pull back near term. We banked a little gain and took some interim gain on other positions as well. It was that kind of day for us, although the market overall held onto its gains rather well.

It was not a given that it would do that. Before the bell opened, we had initial jobless claims come in at 403K, cracking over 400K for the second straight week when only 390K was expected. Moreover, the prior week was revised higher to 416K from the original 412K reported. We see a tick higher in jobless claims, and it is worrisome when you see two weeks back to back. We will see what the rubber match does next week, but you have to be a little concerned, particularly when some companies are taking about trouble.

Other companies are talking in glowing reports. GE and DD beat estimates and boosted their guidance. That has been commonplace. Remember, coming into this earnings season I was talking about the very few warnings or upside warnings, for that matter. That meant I felt that either stocks would be in line or they would be beaten. For the most part, they have been beating the lights out of their expectations, such as AAPL, SCSS, PLXS, QCOM, DD and GE. GE actual grew. It is ironic that the CNBC people are no longer there, always talking about the mother ship. As soon as GE dumps them, earnings start really coming in. Makes you think. I hope I did not give CNBC a complex.

Even though the jobless claims were worse than expected, they did not hamper the move at all. The Philadelphia Fed came out at 10:00 o'clock. It tumbled after an 18-year high at 43 in March. I think that is an appropriate use of the word. It tumbled to 18.5 when 33 were expected. That is almost half of expectations. What is going on in Philly? What kind of slowdown is this? This flies in the face of what we are hearing everywhere else. Could it be one reason the bond market is a little worried? I doubt it. There are probably other things worrying the bond market other than what is going on in the Philly region in manufacturing. If it is endemic to other manufacturing areas, it could be a problem. As we all know, manufacturing is what led the economy out of the black hole following the financial mess.

Leading Economic Indicators are better than expected, doubling up to 0.4% gain, although that was much less than the 1% recorded in February. That was revised higher from 0.8%. We had some decent data outside of a tumble down in the Philly Fed and a second consecutive week of 400K jobless claims. What is the focus right now? Is it Libya? No. Is it the budget deficit? It should be, but it is not. Is it the dollar diving lower? It does not seem to be. Is it the bonds mysteriously holding gains when they should be selling? No. It is earnings, baby. And earnings have been quite good. We have done better hanging onto stocks through earnings than we have selling before them.

Look at IBM. Its earnings were perhaps considered a disappointment on the initial run through, but look what happened on Thursday. It is up 2%, breaking out of its little inverted head and shoulders pattern. Stocks are reporting good results. Companies are doing well, and they are saying things look good. Most of them are big companies instead of smaller ones. That could be a problem, but there is also the small cap index that does not look like chopped liver right now. Overall, that is a positive for the market.


OTHER MARKETS

Dollar: 1.4554 versus 1.4516 Euro. The dollar was down again. The dollar is below any recent support level, and it is having fun with the November 2010 lows. It is right below that level. That puts it in jeopardy of coming all the way back down to the 2008 lows. That is a long way to go, but it could make it there without too much trouble. That is disconcerting to say the least.

The dollar continues to get slammed because the Federal Reserve has no interest in raising interest rates and our government feels that the best way to get out of this mess is to inflate our dollar. That devalues it. That is not a great thing for all of us hard-working citizens who own dollars and have to buy gasoline every day to power our vehicles. Not a good situation for us little pawns in this game of Life. Maybe you know what movie I took that from.

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Bonds: 3.40% versus 3.40% 10 year US Treasury. Bonds were flat. From a longer-term perspective, there is this big selloff from August into February. Now you have a recovery. We had the Egypt and Tunisia issues, and those seem to be quelled. We had Japan. It bounced up, but then fell off after Japan. Now it is back up again. It is trying to put in a higher over the 50 day EMA, other prior peaks, and a gap point. There is a lot of support here. It could move higher.

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Gold: $1,504.00, +4.50. Gold managed a bit of a gain, and it is in a steady run higher. It is a little toppy right now. It is a bit extended in the near term, but there is nothing to indicate that gold will not continue higher. It is over $1,500. That is what I said it would get to. It took a little longer than anticipated, but it is there. I do not think it will not take too long to get to $1,700.

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Oil: $112.29, +0.89. There looked to be a little selloff that would give us an opportunity to get some cheaper gas prices, but it is not working. Looks like oil is right back near its high. This will be an important move for oil. Can it break through that prior peak, or will it act as a double top and come back down? The Gulf CEO said that oil will trade below $100 by July. We will have to see. I am not 100% sure that will happen when looking at the charts. Then again, there is a lot of oil out there.

As Ben Stein said, we have not one teacup less than we had last year at this time, and we had lower gasoline prices. Perhaps we will get to lower prices. Then again, if we do not have a teacup less and gasoline prices are still higher, than something else is causing the problems. Probably those darn speculators. All of you speculators out there who are just trying to make a little extra money in your life because the government is devaluing the dollar as fast as it can. You are somehow a terrible person because you are using your wits to make some extra money in addition to the 9-5. The government thinks that is a bad thing. I guess you are supposed to stand there and take it while the government chops off 20% of the dollar over the last 6-9 months. Thank you very much, Federal Government and Ben Bernanke.

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TECHNICAL SUMMARY

INTERNALS.

Volume. Volume was down. We expected it to be down heading into a three-day weekend. It fell to 1.8B shares on the NASDAQ and down to 811M shares on the NYSE.

Breadth. Breadth was decent on the NYSE at 2:1. It was so-so at 1.5:1 on the NASDAQ. I guess the small caps helped out the NYSE and its performance. We had so-so internals, but we did not expect more on the day. We got our move to the upside, so we did not have much to complain about.


CHARTS

SP500. SP500 gapped up to its March peaks. It could not go beyond that. It closed at the session high, but it is also right at those peaks and below the February high at 1344. You have just under seven points for SP500 to get there. It could do that on the open next Monday if the market is so inclined.

At this point, what do you watch for? You have an inverted head and shoulders trying to break out. That could be gravy for the SP500. It will need help from the financials, which it has not been getting. The energy stocks are recovering and are helping out along with the industrials. It could make the break higher even without the financials, although it would not be a very powerful move. We have to watch out for a possible bounce down and inability to make the break. It has already rallied up to the February peak. It failed, came back down, and made a higher low. Now it has to make the break through. If it does not at this point, it morphs the pattern into slightly more bearish than the somewhat bullish inverted head and shoulders it has shown.

Remember, stocks pulled back nicely ahead of earnings, and they have a nice catalyst with some better-than-expected results in guidance. That has bounced them right back up. Now they have to make the move through that prior resistance; otherwise, it is just a bounce to the prior high. It is one that we were looking to play and have played. All we are doing is looking at the technical picture. Down the road, it will have to do something with that February peak if the SP500 will make further progress to the upside.

NASDAQ. NASDAQ is the same picture. It gapped up above its March peaks, showing a doji. It was unable to move through the February peak. It is in this gap zone where it gapped lower after that high. Very similar to SP500. It needs to do something with this move now. There is the pullback into earnings. You have the catalyst we wanted to. TXN, AAPL you name it are blasting the index higher. Now it has to do something with it. It has given us the move we wanted short term, and we have profited from that. Now it has to do something other than sit and stare at those prior highs with its thumb in its ear or other parts of its anatomy that I will not mention.

SP600. The small caps had a nice 0.7% move. Gapped to the upside. Not a whole lot of action. They moved through the old high, holding up at that level. Still could make a move higher. The small caps have been performing well. We will see if their earnings can be as stellar as the large caps and thus move to a new high as well. You have a nice rally here. There is a double bottom, a rally, and a nice Fibonacci double bottom at the 50% retracement level and the 50 day EMA. It broke higher off of that. I would like to see it take out the prior peak. That will be the important move, not only for the small caps but for the market as well since the small caps represent such a large part of the US domestic economy.

SOX. Semiconductors had their big day on Wednesday. They gapped higher, but they were not able to hold the move. They were tired. A huge gap on Wednesday, but it could not take out the early-April peak. Technically nothing has changed. It had a big day on Wednesday, and that is all it has had. It did not break any resistance or alter the pattern. It helped, but it did not turn it into a near-term positive necessarily. The semiconductors and the SOX are still something to watch as the market proceeds into next week.


LEADERSHIP

I will just run through some names and ask whether any particular group stands out or if it was just a broad move. Judging from a lot of the stocks, it was a rather broad move. XTX is independent energy. Look at this nice bolt higher, 4% to the upside. TZOO, after a two-and-a-half week lateral move, I thought it may form an ABCD pattern. It did not even want to wait. Maybe it only knows ABC. It blasted off for a 27% move on Friday. Did we take anymore gain? No. With that kind of move, I want to let it run. Who knows what is driving this thing. Earnings are growing, China is growing. We will just let it run as far as it will.

PLXS had big earnings and blasted higher. SCSS surged to the upside. AAPL blasted off. MTZ had a strong 5.5% move. HAL posted a 1.6% move. It is looking pretty broad, wouldn't you say? SSYS was not a huge mover up almost 3% but it has had great volume as it took off to the upside. A lot of stocks were moving quite well.

Financial. I mentioned they would have to help the SP500, but they are not. JPM put in something of a bear flag. It sold off, gapped lower. It tried to bounce off of this March low and put in a bear flag. It may roll over. WFC had a disastrous two weeks. It gapped lower on Wednesday and then fell below the 200 day EMA on Thursday. It is not feeling the love. SP500 has been able to move up without them. The question is whether it can continue to do so and move through that February peak if the financials continue their refusal to play along with the rest of the market.

Industrial. CAT gapped to the upside for its second gap in a row. JOYG also gapped to the upside for its second gap in a row. In short, industrials were performing quite well.

Retail. Retailers have also been performing well. BWLD has been moving well, although maybe it did not have its best day on Thursday. LULU put in a nice 2.5% move on Thursday as it continued to climb.

There continues to be a lot of leadership in the market. The question for this coming week is whether that leadership is overextended near term. Many stocks have had a great week to the upside as earnings bolted them higher, but a lot of leaders were already high to begin with, and may be near-term extended. With the market looking at those February highs on NASDAQ and SP500, and with the financials being an anchor chain on the SP500, you have to take note that there may be a bit of profit taking once earnings run their course and the news is no longer big news.


THE MARKET

VIX: 14.69; -0.38
VXN: 15.85; -0.64
VXO: 13.45; -0.82

Put/Call Ratio (CBOE): 0.93; -0.04

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 does not have the cash to drive it higher.

Bulls: 54.2% versus 55.4%. Still backsliding a bit but holding the 6 point surge three weeks back (57.3%). Lower again but still close to that 60+ level that indicates some trouble for a bull run. Hit 55.1% in January and 58.8% on the December high on this leg. It is matching those readings in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 19.2% versus 16.3%. Bearish sentiment is growing despite the indices trading near highs. The pullback from the February peak unnerved some investors as likely did the surge in gasoline, oil, and gold. Down from 23.1% to start April, but making their way back. Fell like a stone on that decline, moving below the April 2010 low. 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more 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: +17.65 points (+0.63%) to close at 2820.16
Volume: 1.882B (-12%)

Up Volume: 1.24B (-550M)
Down Volume: 581.81M (+250.3M)

A/D and Hi/Lo: Advancers led 1.48 to 1
Previous Session: Advancers led 3.13 to 1

New Highs: 143 (+8)
New Lows: 25 (-11)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +7.02 points (+0.53%) to close at 1337.38
NYSE Volume: 811.29M (-16.01%)

Up Volume: 513.42M (-224.69M)
Down Volume: 286.16M (+65.23M)

A/D and Hi/Lo: Advancers led 2.15 to 1
Previous Session: Advancers led 4.54 to 1

New Highs: 394 (+84)
New Lows: 44 (+2)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +52.45 points (+0.42%) to close at 12505.99
Volume DJ30: 167M shares Thursday versus 204M shares Wednesday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

Next week is a big data week. There will be a lot of earnings still coming out. It is already the 25th on Monday, but earnings will run well into May.

New home sales will follow up on last week's existing home sales. There is Case/Shiller which will give us a backward-looking view, but it has not been doing well. It will be interesting whether it can perk up. Will Consumer Confidence perk back up as expected? There are durable goods orders as well as the FOMC rate decision. Mr. Bernanke will come out afterward with the first-ever Federal Reserve Press Conference. They are coming out after the Fed makes its decisions so the Fed head can talk to the world and calm them down if necessary.

It also gives Bernanke the first shot out of the box. It will dilute any dissent to nothing because Bernanke will get to answer all of the dissents before they have a chance to say anything. Instead of them sniping around Bernanke and him having to stoically take it, he will be able to come out on the offensive with the new transparency of the Federal Reserve.

Of course the Fed will not tell us who they loan the money to or where all the money is sitting. That would be too much transparency. After all, it is only our money as tax-paying citizens of the United States of America. That would be just too much for us to know in a government of, for, and by the people. In any event, it will be interesting to see how Bernanke handles it and how the market perceives it.

Q1 GDP is coming out. It is expected to drop, and I think it could go below 1%. Some of the recent data suggests it may not fall that far, but it could go below 1%. Initial claims will be interesting to see. Then we have personal spending and income to close out the week along with the Chicago PMI and Michigan Sentiment.

That is tons of data with the stock market sitting right at prior peaks after a nice earnings run. This was a great move to the upside. We saw a two-week pullback with a bit of concern with all that was going on in the market. The Congress could not agree on any kind of meaningful budget cuts. Then we had great earnings and that pushed everything to the back burner and investors embraced stocks. They bought and were loving life.

We were, too, because we had bought a lot of stocks along the way. All that enthusiasm pushed them right back up for us. We loved the gains. As noted, we were taking them on Thursday. Now we have to deal with that prior high. Earnings seasons tend to run the opposite direction after that set that initial course based on the news coming out. If there is good news and an earnings session starts off well with good response, then you get some profit taking at some point. The key is "at some point" we do not know when that will be.

We do know that we are at the prior peak yet again. We have to deal with that so soon. NASDAQ and SP500 do have a good inverted head and shoulders pattern. Perhaps they can continue to the upside. Earnings are great and guidance has been great. If that continues (and a lot of the SP and NASDAQ companies continue to say they expect results to be better than anticipated) why wouldn't they move higher? The market rallies in anticipation of good news and earnings. It is not necessarily on the news, although it tends to knee-jerk around near term.

We have something of a loggerhead. We have the old high. We have a rally up to that level on great news. Can the news continue in its good fashion? Will that be enough to push it through those prior peaks? As you know, I am not 100% certain about that, and that is why we were taking gains on Thursday. If we had good gains locked in or new positions where we had not taken any before, we were taking some of those profits off the table. Why not? We got the move we wanted.

We may get a move higher on Monday, and we have to watch out. If there is a gap at the open, we have to watch for a reversal. If it gaps up and SP500 taps at that February peak and it cannot hold, we will probably take some of our SPY options off the table as well. We will see how it plays out. We banked some nice gain. We still have more that we could bank, but we are letting the market take us out of a lot of these positions at this point (other than our option positions.) May is coming up, and we have quite a few stocks with May options. We will look at taking more of those off the table on any further rally at this point.

We have to be a cautious. We will look at plays to the upside because of the patterns that NASDAQ and SP500 are showing us and because of the good guidance that we are hearing from these companies. It is not just paltry guidance. They are almost ebullient about the future. In some cases they are not, so we want to have other plays in hand. The thing is, we will have to look for them, because a lot of stocks ran very well this week. Many of them are extended near term, and you do not want to play chase on these. You typically get another shot. With the resistance just overhead, we may get that pullback to start. If the good stocks pull back and hold position and near support, then everything is still fine and they can continue to rally. We would move in as they break back to the upside.

We will look for the best upside we can find the good stuff, not the scrubs. We may not be able to have as much as we normally do because of the good move into earnings. We will probably have to look at some downside in case these things fail. Like the Boy Scouts, we like to always be prepared. Have a joyous Easter weekend. Whatever your beliefs are, I hope you are with good friends and family. I will see you on Monday as we try to make more of the money we enjoy spending this weekend.


Support and Resistance

NASDAQ: Closed at 2820.16

Resistance:
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2816 is the early April peak
2802 is the early March intraday peak
2796 is the February gap down point
2762 is the February low
The 50 day EMA at 2746
2729 is the 127% Fibonacci extension of the August 2010 run
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2603 is the March 2011 low
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
The 200 day SMA at 2532


S&P 500: Closed at 1337.38
Resistance:
1340 is the early April 2011 peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
1332 is the early March peak
1325-27 is the March 2008 closing low and the May 2006 peak.
1313 from the August 2008 interim peak
The 50 day EMA at 1310
1294 is the February 2011 and the consolidation low
1275 is the January 2010 low, early January 2011 peak
1255 is the late December 2010 consolidation range
1249 is the March 2011 low
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
The 200 day SMA at 1213


Dow: Closed at 12,505.99
Resistance:
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,391 is the February 2011 peak
12,283 is the March 2011 peak is bending
The 50 day EMA at 12,173
12,110 from the March 2007 closing low
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak
The 200 day SMA at 11,329


Economic Calendar

April 21 - Thursday
Initial Claims, 04/16 (08:30): 403K actual versus 390K expected, 416K prior (revised from 412K)
Continuing Claims, 04/09 (08:30): 3695K actual versus 3650K expected, 3702K prior (revised from 3680K)
Philadelphia Fed, April (10:00): 18.5 actual versus 33.0 expected, 43.4 prior
Leading Indicators, March (10:00): 0.4% actual versus 0.2% expected, 1.0% prior (revised from 0.8%)
FHFA Housing Price I, February (10:00): -1.6% actual versus -1.0% prior (revised from -0.3%)

April 25 - Monday
New Home Sales, March (10:00): 280K expected, 250K prior

April 26 - Tuesday
Case-Shiller 20-city, February (09:00): -3.2% expected, -3.06% prior
Consumer Confidence, April (10:00): 64.4 expected, 63.4 prior

April 27 - Wednesday
MBA Mortgage Index, 04/22 (07:00): +5.3% prior
Durable Orders, March (08:30): 1.9% expected, -0.6% prior (revised from -0.7%)
Durable Orders -ex T, March (08:30): 1.6% expected, -0.3% prior
Crude Inventories, 04/23 (10:30): -2.322M prior
FOMC Rate Decision, April (12:30): 0.25% expected, 0.25% prior

April 28 - Thursday
GDP-Adv., Q1 (08:30): 1.7% expected, 3.1% prior
GDP Deflator, Q1 (08:30): 2.3% expected, 0.4% prior
Initial Claims, 04/23 (08:30): 390K expected, 403K prior
Continuing Claims, 04/16 (08:30): 3700K expected, 3695K prior
Pending Home Sales, March (10:00): 1.5% expected, 2.1% prior

April 29 - Friday
Personal Income, March (08:30): 0.4% expected, 0.3% prior
Personal Spending, March (08:30): 0.5% expected, 0.7% prior
PCE Prices - Core, March (08:30): 0.1% expected, 0.2% prior
Employment Cost Inde, Q1 (08:30): 0.5% expected, 0.4% prior
Chicago PMI, April (09:45): 67.1 expected, 70.6 prior
Michigan Sentiment -, April (09:55): 69.6 expected, 69.6 prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Monday, April 18, 2011

Stocks Move Higher to Close Expiration

SUMMARY:
- Stocks move higher to close expiration with leaders again improving, but the move doesn t change anything heading into next week.
- Consumer prices rise sharply overall though the core fades.
- Production and Capacity post solid gains
- New York PMI posts a solid month as manufacturing keeps its end up.
- Michigan Sentiment first peak at April bounces back.
- Expect a light volume, holiday shortened week with earnings driving the bus.

MARKET SUMMARY

Stocks rise on an uneventful expiration.

It was an expiration session on Friday. As you might imagine, it did not do much to change the complexion of the market. The indices bounced a bit more and volume was up, but it is typically up on expiration. It has been higher the last two expirations in particular. The SP500 and NASDAQ bounced further off of their 50 day EMAs, but they did not make major changes to their character.

Some leaders continued higher, and that is something we have seen of late. DDS made an upside move, and DSW made a solid move to the upside as well. They were joined by a few stocks across the board. It was not a lemming rush to the upside, but there were leaders once again moving higher as seen on Wednesday, Thursday, and to end the week on Friday.

Stocks started modestly lower but bounced almost out of the gates. They moved up through most of the session, at least until mid-afternoon. There they made a lower high and sold back toward the close, but they did not sell off all the way. NASDAQ, +0.16%; SP500, +0.4%; Dow, +0.46%; SP600, +1%; SOX, +0.66%; NASDAQ 100, -0.16%. Note that the NASDAQ 100 was the mirror image of NASDAQ overall. It was dragged down by some of the large-cap techs that had a rough session. GOOG was slammed down on its earnings. CSCO was down again. AAPL was down, falling back to the bottom of its range and support. We were looking for it to bounce again.

These names are the old vanguard. In the 80's and 90's, they were the newcomers that turned the world on its head with their products. The problem is that, overall, they are not growth stocks anymore. They have become more mature companies that generate money with cash cows. The cash cows keep producing income although innovation is low. The classic story of these is MSFT with its Windows operating system that produces most of the money. It does have games and the like, but it is really not innovating anymore.

Ultimately stocks did close higher, though they were slightly off their highs. They did not change the character of the market or push the ball further downfield. They rallied but the February peak still appears somewhat distant. They are in good position to make a higher low and rally up into next week, which is a shortened week for Good Friday. The market will be closed on Friday. Even though it is earnings, we thus expect a light-volume week ahead of Easter that might see stocks drift to the upside. It may put them within reach of the March high, if not the February peak.

There was plenty of news to drive the action on Friday, but that was not the catalyst. It was more about earnings and following through on a technical pullback. More of the story could be told next week, but we may have to wait to the week after for the definitive answer on how the market will move with respect to that February peak. A lot of what drove the market was the other markets and how they are being treated based on what the Fed and US Government is doing.


OTHER MARKETS

Dollar: 1.4424 versus 1.4488 Euro. The dollar was actually higher on the session. Thursday we had a steep decline, and Friday there was a modest bounce. The dollar has definitively undercut the November 2010 low. It tried to rebound off of a lower low in March. It looked like there may have been a false breakdown there, but it was stymied by the 20 day EMA. The dollar has slid down ever since, and things do not look positive for it.

The dollar is very weak technically, and I do not expect it to get better. Other central banks are starting to raise their interest rates, but the US is not going to follow suit. It said it will continue with Quantitative Easing at least through the end of QE II in June. Therefore the dollar will continue to be undercut in terms of its value. Of course, that means we will have continued problems with inflation. Gasoline rose to 3.815 cents per gallon this week, up 10 cents in a week. We are having serious issues with the dollar, and that is causing serious issues with the products that we have to consume.

http://investmenthouse.com/ihmedia/dxy0.jpeg


Bonds: 3.40% versus 3.50% 10 year US Treasury. Bonds jumped higher. The economic data was actually better than expected mostly across the board, yet bonds gapped through their 50 day EMA. What is going on? If the economy is improving, bonds should be falling and yields should be rising. If the Fed is going to stop with its Quantitative Easing, bond yields should start rising because the Fed stops buying them and pushing yields lower.

Something is bothering the bond market again. Back in December and January when it moved laterally, it turned out that was Egypt and the boiling pot in North Africa and the Middle East. Then it rolled down after that. We said it was just Egypt and maybe it is not the end. Then we had Libya and then the Japan problem. We saw the fear ratcheting back up. Two weeks back it looked like it was over and it broke back lower. Then, all of a sudden, there was a gap to the upside and a test. Then another gap to the upside puts it right back in the fear game. We do not know what is out there. The bond market is worried about something breaking. Maybe it is European countries having a problem, or more problems in the Middle East. We will have to see what happens.

http://investmenthouse.com/ihmedia/tlt.jpeg


Gold: $1,486.00, +13.60. Gold rallied sharply again to a new all-time high. Very strong move to the upside. As we noted on Thursday, just a pullback the prior couple of sessions to near support of the 10 day EMA. Sitting right on top of the prior peaks and then bolting higher on Thursday and again on Friday. Gold can be equated somewhat to bonds as a fear trade, and here we also view it as an inflation trade. Unless it would be somewhat contrary to the bond market because bond yields are falling as bonds rallied last week. You would think if they were in conjunction with gold and worried about inflation, they would be falling and rates would be rising. Maybe there is a bigger fear component in gold than we picked up before, mainly because the bond market was trying to fall. It has reversed and now they look somewhat hand-in-hand, trying to define some problem out in the world that we cannot pin a name on yet.

http://investmenthouse.com/ihmedia/xgld.jpeg


Oil: $109.66, +1.55. Oil had another good day as well. After selling off sharply Monday and Tuesday, it found support at the 20 day EMA as well as the early-March peak. It has bounced three consecutive sessions. It is not blowing the cover off the ball, but it was a good move on Friday. It is off its high but recovering. It is unfortunate because we saw some gasoline prices start to head lower. They were up early in the week, and then they were heading lower late in the week. Now they will probably bounce right back up given that oil is moving up to $110 a barrel.

What had problems the last time it got between $110-115. That caused problems with gasoline and other areas because it created demand destruction. That is when the price gets so high that people have to do without and put off buying things. Maybe they do not put them off at all -- maybe they just have to put most of their money in the gas tank versus making other discretionary expenditures.

http://investmenthouse.com/ihmedia/xoil.jpeg


THE ECONOMY


TO VIEW THE ECONOMY VIDEO CLICK THE FOLLOWING LINK:

Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.html



TECHNICAL SUMMARY

INTERNALS.

Volume. The internals were somewhat bulked up by expiration Friday. NASDAQ volume gained almost 5% to 1.8B, and NYSE volume gained 13% to just over 1B shares on the session. It did move up.

Breadth. Breadth was solid at 1.9:1 on NASDAQ and 2:1 on the NYSE.


CHARTS

SP500. SP500 continued its bounce off of the 50 day EMA. Thursday it was an interesting move as it undercut that level and reversed to move to the upside. That was good action. It showed there were buyers at that level, and it continued higher on Friday. It is really not dispositive because it is expiration Friday and we have a short week coming ahead. It is still in the potential inverted head and shoulders. Looks like it may have put in the right shoulder and we may very well get a rally next week up to the February peak. It is a quiet week and it looks as if the SP500 wants to move to the upside, and light volume can send it that way heading into the holiday.

NASDAQ. NASDAQ showed the same action, coming off the 50 day EMA as well. Looks as if it is also putting in the bottom to a right shoulder to this inverted head and shoulders. We like what we see here. It could also rally up next week to the March peak or even make an attempt at the February high just on a momentum move. The techs have been dragging, however, because the large-cap techs have been holding them back. It is still the same pattern as the SP500. They both have a sector or two that are holding them back, but they act as if they both want to try a bounce to the upside.

SP600. The small caps posted almost a 1% gain on Friday. A good continuation move off their 50 day EMA. Very solid, getting back up to the mid-February peak. Unlike SP500 and NASDAQ, the small caps did break over those levels and rally to a new high. They are testing the move and heading back upside now. That is a good indication for the market overall and for the economy down the road.

SOX. Semiconductors remain in a bad situation. They were up on the session almost 0.7%, but they are really mired in a very sloppy selloff right now. Still below the 50 day EMA. They have a gapdown point. They have a lot of prove coming next week. Maybe they will just follow the rest of the market when they try to make a move.


LEADERSHIP

Retail. There were some good moves again as retail stocks are taking the lead. DDS had a strong move to the upside. DSW had a nice upside gain of nearly 3%. DECK enjoyed a nice move, also almost 3% on strong volume. LULU had a good break to the upside ones more. PCLN had a break higher as well. Retail is once again cranking back up and getting to work.

Technology. Tech was mixed. NVDA continued its break to the upside, although it hit the 50 day EMA and peeled back somewhat on Friday. XLNX bounced. We will see if it can get any momentum as it tries to come off a support level. We are watching these semiconductors closely because the overall pattern of the SOX is not that positive.

Internet has been very strong lately. SABA bounced nicely. A good, sharp bounce on solid volume. TTWO got a good volume shot. It broke to the upside and closed well off the high. Looking at the recent action from mid March, it has an interesting triangle pattern that has formed up again. Looks like a triangle pattern or a trading range over the 50 day EMA. It could make a break higher. Some of the big names are not as impressive. AAPL tumbled back down. It is the group that I talked about earlier. The large caps had a tough time, and they were not able to make that move.

Energy. A recovery is trying to take shape. HAL bounced back above its trendline on some volume. Maybe there is some life there. FTO is edging to the upside, trying to hold it all together. Natural gas is still struggling. CHK is down, but it is holding its 50 day EMA. Energy is trying to make a recovery move.

Metals. Metals are not trying to make a recovery move. FCX fell on stronger volume. AKS posted a modest loss, and it is struggling right now. STLD may hit the bottom of its range and bounce. It sold off. Look how volume jumped up as it sold back to this prior range. It is one to watch. It may give us a trade off of that level. We will have to see.

Industrial. Industrials finished up the week decently. They were down a bit on Friday, but they are trying to hold in a lateral move. CAT is over its 50 day EMA and the February and March peaks. DE is doing the same, trying to hold over the 50 day EMA. They are not in bad shape, just trying to hold and make the next break to the upside.

Financial. Financials are in bad shape. JPM was down again after gapping lower on Thursday. WFC is diving on heavy volume to the downside. At least some of the regionals are not so bad. STT is holding with a pair of doji at the 50 day EMA. We will see if it can bounce from there.

It is the same story we have seen all week with some areas moving higher. Retail is strong. Software is looking good. Other areas are not doing as well, such as large-cap tech and financials. Energy is hanging on and may be able to recover. We have some possibilities for recovery that could help the SP500 and NASDAQ move up toward that February peak next week.


THE MARKET

VIX. There was a gap lower on Friday, and it took it down to the April 2010 level. That is coincident with other points from a long, long time ago, and a market far, far away. All the way back in 2004-2006. What happened during those years? The market moved laterally, but then it rallied during this period. There was not anything negative about that. There is no negative connotation right now with respect to it touching this level. It may try to signal an interim top, but right now there is not that kind of correlation between volatility and the stock market moves. It is not that really close correlation. In any event, volatility can continue to fall for quite some time while the market rises. You have to worry when volatility rises while the market is rallying.

VIX: 15.32; -0.95
VXN: 17.48; -0.22
VXO: 15.3; -0.76

Put/Call Ratio (CBOE): 0.93; -0.04

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 does not have the cash to drive it higher.

Bulls: 55.4% versus 57.3%. After flying 6 points higher the prior week, bulls checked their stampede a bit. Lower but still moving toward that 60+ level that indicates some trouble for a bull run. Hit 55.1% in January and 58.8% on the December high on this leg. It is matching those readings in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 16.3% versus 15.7%. Rebounding some but still suffering the hangover from that plunge lower from 23.1% to start April. Fell like a stone on that decline, moving below the April 2010 low. 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more 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: +4.43 points (+0.16%) to close at 2764.65
Volume: 1.81B (+4.46%)

Up Volume: 1.07B (+259.16M)
Down Volume: 709.03M (-181.99M)

A/D and Hi/Lo: Advancers led 1.88 to 1
Previous Session: Advancers led 1.29 to 1

New Highs: 84 (+33)
New Lows: 31 (-20)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +5.16 points (+0.39%) to close at 1319.68
NYSE Volume: 1.05B (+13.44%)

Up Volume: 657.83M (+194.23M)
Down Volume: 377.46M (-65.26M)

A/D and Hi/Lo: Advancers led 2.12 to 1
Previous Session: Advancers led 1.26 to 1

New Highs: 152 (+51)
New Lows: 27 (-2)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +56.68 points (+0.46%) to close at 12341.83
Volume DJ30: 235M shares Friday versus 141M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

There is plenty of economic data. Housing starts and building permits are on Tuesday. Existing home sales on Wednesday. Thursday you see the FHFA Housing Price Index. That will give a good picture of the housing market overall. There will also be some other typical data such as initial claims and the Philly Fed. Leading indicators are out on Thursday as well.

There is no Friday report due to Good Friday. We have a four-day week that proceeds Easter, and that is historically a light-volume week. We are expecting light-volume trade. That means that we have a bounce in progress. We will have a lot of earnings, and they will be driving the action as well. Thus far some earnings have not been a great, but the market has been able to hold at the 50 day EMA support and bounce. We may get a drift toward the March and April peaks. That would not be bad; a move up to those levels is what we are playing for. If it gets up there, you can bet your bottom dollar we will be taking gain off the table.

We have some new positions that we started on Wednesday and Thursday during this action, and that gave us a good slingshot to the upside on those positions. We can take some gain there. As our other positions move up, we can bank some there as well. At this juncture, we are not banking on a breakout. We are looking for a move back up to this February peak, and that will be the definitive test for SP500. Will it get tossed back down like a sack of potatoes, or will it use this inverted head and shoulders to make the breakout? That will be the story it will tell us, but not likely next week. It will probably be the week after that when the market comes back from Easter.

During that time, we want to take advantage of it. We will be looking for a few plays to the upside to see if we can capture this continued move. Maybe we can get a little earnings wave to push it higher into that February peak. There are still some stocks in good buy-point positions, even after we picked some up on Wednesday, Thursday, and Friday as market moved higher. Not all stocks leave the gate at the same time; therefore, we can catch them in waves. We probably do not have a huge amount of time to play with here, but this can give us a nice four-day move up to that high. If we get there, there will probably be some profit taking. That would be our plan, anyway.

We will continue to look for some plays up to the February peak. At that point, we just have to see which way the market takes us and be ready for either way. There could be a downdraft from that level if this move is not strong and the earnings do not come in and corroborate a breakout move. If things do improve strength-wise and we get the breakout, I am all for that, too. We cannot complain since we are obviously upside-biased at this juncture.

We will see what wrangling there is over the weekend with respect to the budget. The next big vote will be the debt ceiling. I am of the opinion that you do not need to raise the debt ceiling. We are going to pay our debts. All it does is make us try to come to terms with where we will spend our money since we will not be able to borrow anymore. If we cannot borrow anymore, we have to make tough choices.

I know a lot of the politicians are saying that our creditors would run away from us because we will not be able to pay the debts. We will pay our debts, however. You know we will. I think creditors would be more excited about us actually saying we will put a limit on how much we borrow so we will make the tough choices about where we spend our money. Would they be happier with us saying "what the hell" and raising it another $2T? What do you think makes creditors more comfortable? To dilute what they have or to take the necessary steps to ultimately make the debt they are holding worth something? I will let you make the call on that one.

Have a greet weekend!


Support and Resistance

NASDAQ: Closed at 2760.22

Resistance:
2762 is the February low
2796 is the February gap down point
2802 is the early March peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
The 50 day EMA at 2740
2729 is the 127% Fibonacci extension of the August 2010 run
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2603 is the March 2011 low
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
The 200 day SMA at 2516
The November 2010 low at 2460


S&P 500: Closed at 1314.52
Resistance:
1325-27 is the March 2008 closing low and the May 2006 peak. Bending.
1332 is the early March peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
1313 from the August 2008 interim peak
The 50 day EMA at 1308
1294 is the February 2011 and the consolidation low
1275 is the January 2010 low, early January 2011 peak
1255 is the late December 2010 consolidation range
1249 is the March 2011 low
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
The 200 day SMA at 1206
1185 from late September 2008
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 12,285.15
Resistance:
12,283 is the March 2011 peak is bending
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
The 50 day EMA at 12,131
12,110 from the March 2007 closing low
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak
The 200 day SMA at 11,267
11,258 is the April 2010 peak
11,205 is the April closing high
11,100 from the 7-08 low
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

April 12 - Tuesday
Trade Balance, February (08:30): -$45.8B actual versus -$45.7B expected, -$47.0B prior (revised from -$46.3)
Export Prices ex-ag., March (08:30): 1.3% actual versus 1.0% prior (revised from 0.9%)
Import Prices ex-oil, March (08:30): 0.6% actual versus 0.5% prior (revised from 0.3%)
Treasury Budget, March (14:00): -$188.2B actual versus -$189.0B expected, -$65.4B prior

April 13 - Wednesday
MBA Mortgage Index, 04/08 (07:00): -6.7% actual versus -2% prior
Retail Sales, March (08:30): 0.4% actual versus 0.5% expected, 1.1% prior (revised from 1.0%)
Retail Sales ex-auto, March (08:30): 0.8% actual versus 0.7% expected, 1.1% prior (revised from 0.7%)
Business Inventories, February (10:00): 0.5% actual versus 0.8% expected, 1.0% prior (revised from 0.9%)
Crude Inventories, 04/09 (10:30): 1.627M actual versus 1.952M prior

April 14 - Thursday
Initial Claims, 04/09 (08:30): 412K actual versus 385K expected, 385K prior (revised from 382K)
Continuing Claims, 04/02 (08:30): 3680K actual versus 3700K expected, 3738K prior (revised from 3723K)
PPI, March (08:30): 0.7% actual versus 1.1% expected, 1.6% prior
Core PPI, March (08:30): 0.3% actual versus 0.2% expected, 0.2% prior

April 15 - Friday
CPI, March (08:30): 0.5% actual versus 0.5% expected, 0.5% prior
Core CPI, March (08:30): 0.1% actual versus 0.2% expected, 0.2% prior
Empire Manufacturing, April (08:30): 21.7 actual versus 15.0 expected, 17.5 prior
Net Long-Term TIC Fl, February (09:00): $26.9B actual versus $51.1B prior (revised from $51.5B)
Industrial Production, March (09:15): 0.8% actual versus 0.6% expected, 0.1% prior (revised from 0.0%)
Capacity Utilization, March (09:15): 77.4% actual versus 77.4% expected, 76.9% prior (revised from 77.0%)
Michigan Sentiment, April (09:55): 69.6 actual versus 66.5 expected, 67.5 prior

April 18 - Monday
NAHB Housing Market Survey, April (10:00): 17 expected, 17 prior

April 19 - Tuesday
Housing Starts, March (08:30): 520K expected, 479K prior
Building Permits, March (08:30): 538K expected, 517K prior

April 20 - Wednesday
MBA Mortgage Purchases, 04/15 (07:00): -6.7% prior
Existing Home Sales, March (10:00): 5.00M expected, 4.88M prior
Crude Inventories, 04/16 (10:30): 1.627M prior

April 21 - Thursday
Initial Claims, 04/16 (08:30): 390K expected, 412K prior
Continuing Claims, 04/16 (08:30): 3650K expected, 3680K prior
Philadelphia Fed, April (10:00): 32.9 expected, 43.4 prior
Leading Indicators, March (10:00): 0.2% expected, 0.8% prior
FHFA Housing Price I, February (10:00): -0.3% prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Monday, April 11, 2011

Fed Makes Same Mistakes of the 1970's

SUMMARY:
 After 4 days of lateral consolidation SP500 dips to the 10 day EMA. Of course it must have been due to the pending government shutdown.
 Liquidity versus Oil: Oil breaks $112/bbl and may have finally hit consumers' choke point as Fed makes same mistakes of the 1970's.
 Bernanke, a Great Depression expert, needs to bone up on the 1970's.
 Rapidly declining dollar adding horsepower to the oil and commodity price spike, and consequently, inflation.
 Tired of whiners.
 Despite all the hoopla Friday, it was a pretty normal, and small, pullback.

MARKET SUMMARY

A normal dip is packaged as a 'shut-down selloff.'

I had 'Wizard of Oz' d j vu today listening to the so-called financial stations covering the potential government shutdown. Listening to the sanctimonious leaders of the Senate and House, I was reminded of the phrase, "Lions and tigers and bears! Oh my!" One side argued that women were not going to be able to get their cancer screenings at Planned Parenthood while others argued over an amount of money that, with a deficit of $4B piling up per day in the US, was less than 10 days' worth of activity.

I am not sure how you spell futile, but looking it up in the dictionary they may have a definition that talks about our two-party system arguing over an amount that is 0.25% of our deficit. I heard a Congresswoman from Florida saying the 2012 budget proposed by Mr. Ryan would be a tornado through the rest homes of the elderly. Piled on top of the rest of the nonsense we have heard this week, it appears that our leaders' hypocrisy knows no bounds.

The government does not need to be shut down. What needs to happen is to get rid of all of these so-called leaders and I mean from the Senate, the House, and from the executive branch. We should start over with people who have backbones and can actually make decisions on how to run the country. Of course all of the networks and so-called financial stations feed right into the hyperbole and dogma by reporting breathlessly about this government shutdown and how it will impact the economy.

Looking at a chart on the session, it chopped around all day and then as the last two hours started, the market sold off for 45 minutes. You would have thought there was a 10.0 earthquake in Japan (or in DC, for that matter). Everyone said it had to be the shutdown that was imminent. Frankly, history shows us that the stock market does not sell off because the government shuts down. It kind of likes it. It feels like the government is taking a vacation and not spending money, so the stock market goes up. Maybe there was a bit of impact on the market. Maybe.

Let's take a look at a chart of the SP500. For the past week it has been moving laterally in a tight range. What have we said? It could either consolidate in a tight range or come back and test a bit. It only made it down just below the 10 day EMA on the Friday low and then rebounded to hold that on the close. It has had a three-week run to this level right before earnings. It went up to another resistance point on top of a big rally already, and then a decent-sized selloff. Does it make perfect technical sense that the market got a little ragged at the end of the day? Damn right.

Of course just when all the journalists who try to pass as market analysts got totally worked up about the selloff, it turned, reversed, and cut more than half of that last two-hour selloff heading into the close. Despite the market being petrified by a supposed imminent shutdown, buyers still stepped in and used the dip to buy. Could it also have been that there was some light volume on the session? Trade was very light. It made it quite easy for a mutual fund or two to take some profits after a nice rally and a lateral move below resistance that could not make the break. And right before a weekend. Did it make sense that they took some gains? You betcha. Sorry, I do not mean to quote Sarah Palin again, but that just rolls off the tongue. I cannot help myself.

So what was the problem? Was it a government selloff? Poppycock. Nonsense. I would call it something else, but some kids listen to this. There are some serious issues facing us versus less than 10 days' worth of our deficits. That has to do with oil, my friends. Looking at the chart, oil shot higher again to $112.79, up $2.49. It is exploding higher as our dollar swirls around in the toilet and is heading to the sewer right now. That is the problem.

The Fed has its massive liquidity versus a tanking dollar and, consequently, surging oil, surging gold, and surging all commodities. It is a game of the Fed and its liquidity trying to inflate our way out of our deficits versus the rest of the world taking action against too much liquidity (or actually having a strong economy, such as China). Also their currencies are inflating versus the dollar, thus we are getting it from both ends. The dollar is weaker, and then everything denominated in dollars is even more expensive. Every time the dollar drops, you have to pay with more dollars to get those commodities. It is a vicious cycle, and we could have some serious trouble ahead.

This break today was very important. A lot of very smart economists and investors are saying that $110 barrel of oil was the choke point. That is the critical level for the consumer and the US economy. Now we are blowing through that. It was a gusher through that level. It was a blow out. Yes, my hypocrisy knows no bounds either as I use painfully trite phrases, but you get the point. There is a serious dichotomy going on here, and we have a problem.

I am a bit off path from the way we normally do things, but these are important issues. We have a Fed chairman who is an expert in the Great Depression, and he does not want the same things that happened then to happen now. He is more worried about deflation. I heard the people on the left talking on TV last night about how we are in a deflationary environment. What world are they living in?

The Fed was talking about the iPad coming down in price the other day as if that was some proof of deflation. I'm sorry, but most of us do not buy more than one iPad a year. The problem we have here is this is not the Great Depression anymore. We foster the same policies we did after the Great Depression, but now this is something more akin to the 1970's on top of the Great Depression. What happened then? We had oil shocks. Oil spiked higher, the dollar dived, and inflation ran rampant. We do not have inflation running rampant yet, but we are sowing the same seeds we did in the 70's that led to the 22% interest rates and stagflation. The Fed is monetizing the oil rally. It is further deflating the dollar by pumping more and more liquidity and keeping interest rates low. The Fed did just that in the 1970's when it felt it had to monetize the economy in order to keep the consumer from completely going stagnant.

What happened? The consumer and businesses went stagnant because interest rates shot to the moon as did all commodities and other prices and nobody could afford anything. The Fed is doing the same thing by putting the pedal to the metal as oil rises. The Fed is guaranteeing that we will have inflation. It is guaranteeing stagflation. In trying so much to avoid the sins of the past and the Great Depression, it is committing the sins of another era. It has been blindsided by the 1970's. While it was looking for low and away just like Moonlight Graham when he was up to bat. They are looking for low and away when they should be looking for in their ear. And it will catch them in the ear.

That all sounds pretty gloomy. It is not a great scenario, but it did not really tear the market apart. Why not? The market is going to be a bit slow to come around because we have that battle ongoing. Liquidity provided by the Fed is good for financial assets. Inflation is starting to move up, but it is not ripping higher. It is not going to eat into the stock market and stock gains. Sometimes inflation actually helps stock prices initially. If the Fed even started to raise rates anytime soon, history shows that the stock market does not mind the initial wave of rate hikes. It even holds up well into the last round when the Fed gets aggressive. That is what finally turns the market down. The market is still enjoying the liquidity.

The dollar may be tanking, but it is doing okay because a lot of the stocks inside the SP500, NASDAQ, American Stock Exchange, et cetera, produce the commodities that are going up in price. They will do just fine. A lot of companies produce the equipment that helps to mine these commodities and bring them to market and refine them. They will do just fine as well.

The stock market can do well while Rome starts to burn. Eventually when Rome burns down, the stock market has a hard time. Some day we will get there, but we are not sure when that will be. We will keep watching the market, but we are still early in the progression. We may not see anything for quite some time. The worry near term is the price of oil and how it is exploding higher. That could be a very serious problem. Is it at an all-time high? No, but we are killing the dollar right now to get there.

We are pursuing a policy to prevent deflation when it is our opinion (and the opinion of many smart economists and other investors) that we are pursuing a policy that will create some horrid inflation. It is not the 1930's anymore. We have to fast forward into the 1970's. The problem is shifting. We better shift our policy with it, or we will throw ourselves from one crisis of the 1930's-era to the next in the 1970's. Been there. I do not want to go back to the 70's. Disco music, the Beatles had broken up it was not good. Let's not go there again. We need leadership. We are not getting it from the Washington, unfortunately. I think the leadership we are getting from the Fed is already outdated.

Looking at the market, the losses were not that severe. NASDAQ, -0.5%; SP500, -0.4%; Dow, -0.25%; SP600, -1.2%; SOX, -0.8%; NASDAQ 100, -0.5%. The SP600 took it on the chin. There are worries that the small caps will take the hardest hit if the government shuts down. This is one area where there may have been some selling with respect to a shut down, but there was nothing major. The market chopped around again and tried higher. The indices tried higher toward the February peak and could not do anything about that. It sold off and bounced off the 10 day EMA. No major damage done.


OTHER MARKETS

Dollar: 1.4453 Euro versus 1.4304. What a tail kicking. The dollar is getting blasted right now. It tried to bounce but failed, and now it has undercut this recent low. We will now see it head down to the Q4 2009 lows just before the market reversed and rallied. The question is if it will be able to hold at this support level or if it will dive down to the 2008 lows. We will see what happens here. The dollar has double topped in this range and it is in trouble. Does not look healthy at all.

http://investmenthouse.com/ihmedia/dxy0.jpeg


Bonds: 3.58% versus 3.55% 10 year US Treasury. Bonds sold, but they came off of their lows. Looking at a daily chart, bonds have come off of their fear trade of something happening in the world. Now they are just recognizing that the Fed is creating an inflationary environment and are selling off.

http://investmenthouse.com/ihmedia/tlt.jpeg


Gold: $1,474.40, +15.10. Gold is heading to the moon as well. It was about a year and a half ago that I said gold would hit $1,500. It is within spitting distance now, and nothing is stopping it either. It is an inflation thing. The US is not taking care of business, and I think the market has figured out that it is more of a 1970's scenario versus the 1930's. It wishes that Bernanke would figure that one out as well. Again, the iPad comments go to show you how out of touch they are. They are into theories and models of the economy versus pragmatic looks as what is happening. That is always dangerous.

Of course you have to look at models, but you have to mesh it with history, reality, and the facts. I think Bernanke got a bit cocky, frankly, because everyone was saying that he has called it right thus far. I think he is missing the boat here. Maybe I am totally wrong. I hope I am. I hope he is just as brilliant as everyone says he is, but this could be a big mistake.

http://investmenthouse.com/ihmedia/xgld.jpeg


Oil: $112.79, +2.49. Oil has broken out and has gone straight up. It is not an all-time high. We had that way back at $145-147 in 2008. We are not there, but we are heading that way. As the dollar dives lower, it will accelerate the move.

http://investmenthouse.com/ihmedia/xoil.jpeg


TECHNICAL SUMMARY

INTERNALS.

Volume. It was a very light volume day. Volume fell 8.5% on NASDAQ to 1.65B. It dropped almost 10% on the NYSE to 821M.

Breadth. Breadth was more aggressive. -2.2:1 on the NASDAQ, decliners over advancers. -1.6:1 on the NYSE. Not nearly as bad, even though the small caps did take one square on the chin.


CHARTS

SP500. SP500 had a lateral move right up to resistance. Earnings are up ahead. It tried it one more time just as it did on Monday, Tuesday, Wednesday and Thursday. It was unable to make the move and it sold. It undercut the 10 day EMA. Wow, the 10 day EMA such a deep test! Then it rebounded to hold that level. No churn, no heavy selling, and volume was extraordinarily light. That is what allowed a couple of big funds to take some profits and push the market lower. That is all it was. As soon as they took some profits, buyers jumped back in and bought it back up.

It did not drive it all the way to positive, but it was not a day that would be positive. There was too much intrigue out there, and you have earnings coming next week. It is moving laterally. It could easily come back and test this February low and then rebound. As a matter of fact, I would prefer if it did that. That would give it more of a ramp to run into earnings and move after we get some good results.

NASDAQ. NASDAQ showed similar action. It gapped to the upside. Then could not hold the move and reversed, closing at the 10 day EMA. That is the nearest support you can get. It pulled back a little, but no volume whatsoever. It is below the March and February peak. We can live with that. Could it set up an inverted head and shoulders? I have to say it again: You betcha. I'm sorry. Perhaps I need to adopt a Trumpism since he is the new personality for this election cycle.

In any event, you can see it tried to set up. I do not see any danger here at all. It could happen. It could turn over and dump lower, but for now, the liquidity is trumping. Maybe the oil story beats it over the head and drives it lower, but we have had a nice rally. We are coming into earnings. We had a kickback here. Looks like a left shoulder, a head, and now it could form a right shoulder. We will see how it shakes out.

SP600. SP600 was down the worst, taking a 1.2% hit. It did close below the 10 day EMA, but as I said the other night, that is not out of the norm. Light-volume selling. It is still coming back to test the breakout. It has already broken through the February peak, so it has the luxury of coming back and making that test. If only the other indices had done that as well. They have not. SP600 is fully within its rights to come back and make this test. If it keeps selling, that is a problem. I bet you if any of this selling was related to a shutdown in the government, when they make a deal either tonight, the next day, or sometime early next week, it will bounce right back up. It just sets up a better ramp to the upside. I am not going to complain at all.

SOX. The semiconductors are a bit down, but no big deal. Still moving laterally, holding over the 50 day EMA that they gapped over on Tuesday. No big move by the semiconductors. They are struggling, no doubt, but they will follow along with the rest of the market if it decides to make the move higher. The question is whether they will make the move higher or if they just sell off near term. They may pull back some more next week. Earnings are coming out, and they may be a bit pensive. If we get a pullback down to this February peak or maybe just the 50 day EMA on the SP500, that gives the index and the market a much better ramp to rally up into earnings. You could also get a little inverted head and shoulders here with a pullback to the 50 day EMA as well.

While the action may have had a bunch of people lathered up and all in sweats on Friday, it was all pretty much as expected. It was interesting to a point watching all of the commentary about the government shutdown. It is history in the making, no doubt about that. It has been 15 years since we had a government shutdown, but if we ever needed one, this is the time. We have $4B added to the deficit every day. We are borrowing 40 cents on every dollar that the federal government spends. In 15-20 years, 100% of the tax revenue taken in by the federal government is going to go to entitlement programs such as Medicare, Medicaid, and Social Security. Yeah, this is a time to shut the government down. To reassess and get rid of a bunch of these agencies that have done nothing good for us.

Take the Department of Education. We doubled and tripled the spending, and what do we get? Test scores that are trending lower and abilities that are trending lower. After this period, I think it is time to make the cuts when you see a failure. Shut it down, but only if it leads to a reassessment of what the going on and not more finger pointing and name calling. I know, I must be dreaming with this pie-in-the-sky stuff. But that is exactly what is already happening, and it will happen anyway.

Like I said, we need to get rid of them all and start over with people who give a darn about actually fixing problems. I am painting with a broad brush; there are some very good people doing a good job and trying to focus on the right things on both sides of the aisle. There is hope, but after seeing today's display, I feel like hosing myself off a few times.


LEADERSHIP

It seemed like everything took a hit on the session.

Financial. Financials gave back a bit of ground after looking good at the end of last week. JPM and GS came back a bit, but it did not disrupt their patterns. They can still make the break to the upside. In general, things gave back somewhat.

Industrial. CAT gave back a bit. DE tested and bounced. It may give us a good buy. We are looking at that flag. JOYG as an inverted head and shoulders that it broke out of, making a nice test of the 10 day EMA. Construction still looks fine.

Retail. Some of retail came under pressure on Friday. A lot of that was worries about what will happen to the consumer in the shutdown. We have a little pullback here. PNRA is selling off pretty good, taking it on the chin. BWLD is holding up quite well. What about some of the stores that did so well on the week with big moves? ANF came back a little bit. BKE moved well on Thursday, and it gave back a bit on Friday. There were no major selloffs. One we were really interested in today that actually performed very well was TRLG. It surged up 7%. Glad we are in that one. I was wondering why that would be up on a day like today? Maybe it is because our fearless leaders need to get some true religion and get back to the basics. I am going to throw out at aside here, just bear with me.

I was listening to some commentators talk about how the extreme Tea Party was causing problems. They said the Tea Party would have a bad image because they were trying to force social issues that we have discussed over the past 10, 20, or 30 years into this budget bill. One of those being the Planned Parenthood or abortion issue. The commentators are missing the point. They are not pushing that into the debate because they do not like abortions. Many of them do not, but the point is they do not believe that the Constitution allows federal money to be spent on that.

It is not that they are objecting to it; it is that the government should not be doing it. They are more libertarian in their views. It is a personal decision whether or not someone wants to do that. Whether you abhor it or you are pro-choice or whatever, the government should not be involved in it at all. That is the Tea Party position. That is why this is an issue. This money should not be spent there because that is not the purview of the federal government. But I digress. I will get back to talking about the market.

Metals. Gold really surged, but are the industrial metals doing any good? They tried. FCX is moving higher. That is the copper maker. It has been moving higher, but it is amazing. It gaps to the upside, and then it sells back. It gaps higher and then it holds. It gaps to the upside and sells back, etc. It is moving to the upside, but it is a slow slog. Steel, on the other hand, is having some issues. SCHN is trying to make a move, but it fell back to the 50 day EMA. They are struggling.

Industrial metals are struggling while the money is going into silver and gold directly not even into the companies that mine them necessarily. Very interesting money movements. Why are they moving this way? Is it because of the market? Yes. It is not because of demand. What our policy-makers are doing forces investors to go certain routes. The beauty of it is we still have many stocks across the market that are performing quite well.

Semiconductors. Even the semiconductors that have been under pressure are doing okay. FCS is doing pretty well. NVDA had a bad pullback of late, but it is trying to bounce off of the 28% Fibonacci retracement. That is a cool level to try to do it. There are others out there trying to same thing.

We are seeing good moves whether it is some tech, industrials, precious metals, or even retail. The question overriding all this for the next two to three weeks is how oil will bleed over into the stock charts of other leaders. How is that going to affect them? Will it start eroding them because the investor perception is that the consumer is going to run out of money? Is $110-112 going to be the literal choke point for the consumer in spending?

March Same Store Sales were great, but gasoline as gone up over 20 cents in a week. Oil is up 30% in two months. Can the consumer keep pace? The inflation in food and energy costs has now outstripped the additional monies that were saved and/or put in the pockets of consumers by virtue of the tax cuts (whether extended or the new tax cuts). When the money runs out, where will they spend? After the money is gone, we will see.


THE MARKET

VIX. The VIX was up 4.5% on the session, but that is no surprise. The market actually did sell, and there was a lot of fear. There was a lot of lather and a lot of bogus fear in my opinion. In any event, the VIX is not showing any real danger that there is a major selloff in the works. A normal pullback? Of course. We have been talking about the potential for a normal pullback, but this chart does not show anything major in the works.

VIX: 17.87; +0.76
VXN: 19.76; +0.42
VXO: 16.53; +0.97

Put/Call Ratio (CBOE): 0.87; -0.02

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 does not have the cash to drive it higher.

Bulls: 57.3% versus 51.6%. Whoa there big boy. Bulls surged on the week, getting close to a more dangerous level. Getting close enough for discomfort. Whatever skepticism was holding the bulls back evaporated. Hit 55.1% in January and 58.8% on the December high on this leg. It is matching those readings in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 15.7% versus 23.1%. Falling like a stone, moving below the April 2010 low. 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more 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: -15.72 points (-0.56%) to close at 2780.42
Volume: 1.659B (-8.55%)

Up Volume: 505.94M (-179.46M)
Down Volume: 1.07B (-40M)

A/D and Hi/Lo: Decliners led 2.21 to 1
Previous Session: Decliners led 1.77 to 1

New Highs: 72 (-45)
New Lows: 37 (+11)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: -5.34 points (-0.4%) to close at 1328.17
NYSE Volume: 821.13M (-9.81%)

Up Volume: 252.17M (-132.41M)
Down Volume: 550.33M (+37.06M)

A/D and Hi/Lo: Decliners led 1.63 to 1
Previous Session: Decliners led 1.63 to 1

New Highs: 327 (+93)
New Lows: 40 (+17)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: -29.44 points (-0.24%) to close at 12380.05
Volume DJ30: 123M shares Friday versus 158M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

There will be more scheduled data than this past week. There will be import and export prices, and that should be very interesting. Retail sales for March come out, and that should be decent given what we have heard from the Same Store Sales. We will also have the PPI and CPI along with more regional manufacturing reports and Industrial Production and Capacity. There will also be Michigan Sentiment. We will see how they are feeling up there in the cold north.

A lot of data coming out, but a lot of the focus will be on the oil prices. There will also be some focus on what the federal government is doing. We want to get them back to work as soon as we can; we do not want the whiners out there. There are definitely some whiners. I heard stories today and saw some on TV. Small businesses that have government contracts will not be able to work their people because the government is shutting down. They said they never expected that to happen, but it is like the people who joined the National Guard who never expected to go to war. It is just part of the deal.

Frankly, if you think you have the security of government contracts, I'm sorry, but this just makes you join the real world. Join the business world. Contracts can be canceled at any point with the government included. This is not even canceled. They will be back to work in short order, and the work will still be there. Quit your bellyaching. It reminds me of the people who get luxurious pensions and are worried about having to lose some of it. The rest of the private sector world is facing those issues every day, thank you very much. Join the real world. But I digress once again, and I am sure I have upset a few people. Sometimes I just cannot control myself.

In any event, let us talk about what we are looking at next week. We are getting what we want as far as the market. It is not rallying higher. That would have been nice, but we might get a bit of a pullback. That will give us a better ramp to the upside. Earnings will come out, so a little pullback would not hurt at all. It would make things all the better. Having rallied for three weeks ahead of this lateral move, the market is vulnerable to a pullback at this level just below resistance as initial earnings come out.

We do not expect them to be weak. We have hard very few warnings positive of otherwise so we are looking at basically in-line. Will in-line drive them further? Maybe not with oil at $113, the dollar sinking, and inflation rising. Any pullback we get ahead of that would be a good thing. If we get a pullback to the 50 day EMA or the February low, that might get very interesting. We have good stocks that are already in buy position. Take industrials such as JOYG and DE. They are out there. We want to be able to pick them up as they bounce, so we will be watching. A pullback is a good thing right here because it will put even more stocks in good position to buy.

We will mind our stops, of course. We watched the market bounce back after the selling today. It put a lot of our positions that were dancing around with our stop points back above them. We do not know how this oil thing will play out, so we will mind our stops and protect ourselves. We have some good gains and we do not want to lose them. Then we will see how things play out. If we get a pullback, we will be able to buy back in and make new good trades to the upside, whether short term or longer-term trades. We do not always do it over a day, a week, or three weeks. We have had trades for months and months and even years. You know we will let a trade run as long as it will run for us.

Watch the oil. Expect a pullback and do not get freaked out by that. Just be ready to move in and take advantage of it. We have some hedges. We have some downside plays, and we took some gain on one of them on Friday. If we get another pullback, we will be able to take some more on the SPYder play and others. We have ourselves a bit hedged. We will mind our stops, and we will look for opportunity while we wait and see how this plays out.

Try to enjoy what you are seeing somewhat. If we survive all of this, it will be interesting to tell the grandkids and the great-grandkids someday. You will also be able to tell them how you kept your head and were able to take advantage of it to build up the inheritance they will enjoy. Have an outstanding weekend. Enjoy the spring and do not let the shutdown worry you. Maybe the President will not get his trip for the weekend and that as him annoyed. Whatever. We are bigger than that and we see the big picture. We know what is going on, and we know the fight is to come when we try to rescue our country from this debt. I will see you on Monday, and maybe we will find the media a bit less lathered.

Have a great weekend!



Support and Resistance

NASDAQ: Closed at 2780.42

Resistance:
2796 is the February gap down point
2802 is the early March peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2762 is the February low
The 50 day EMA at 2736
2729 is the 127% Fibonacci extension of the August 2010 run
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2603 is the March 2011 low
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
The 200 day SMA at 2504
The November 2010 low at 2460


S&P 500: Closed at 1328.17
Resistance:
1332 is the early March peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
1325-27 is the March 2008 closing low and the May 2006 peak. Bending.
1313 from the August 2008 interim peak
The 50 day EMA at 1306
1294 is the February 2011 and the consolidation low
1275 is the January 2010 low, early January 2011 peak
1255 is the late December 2010 consolidation range
1249 is the March 2011 low
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
The 200 day SMA at 1201
1185 from late September 2008
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 12,380.05
Resistance:
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,283 is the March 2011 peak
12,110 from the March 2007 closing low
The 50 day EMA at 12,102
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak
11,258 is the April 2010 peak
The 200 day SMA at 11,221
11,205 is the April closing high
11,100 from the 7-08 low
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

April 08 - Friday
Wholesale Inventories, February (10:00): 1.0% actual versus 1.0% expected, 1.0% prior (revised from 1.1%)

April 12 - Tuesday
Trade Balance, February (08:30): -$45.7B expected, -$46.3B prior
Export Prices ex-ag., March (08:30): 0.9% prior
Import Prices ex-oil, March (08:30): 0.3% prior
Treasury Budget, March (14:00): -$189.0B expected, -$65.4B prior

April 13 - Wednesday
MBA Mortgage Index, 04/08 (07:00): -2% prior
Retail Sales, March (08:30): 0.5% expected, 1.0% prior
Retail Sales ex-auto, March (08:30): 0.8% expected, 0.7% prior
Business Inventories, February (10:00): 0.8% expected, 0.9% prior
Crude Inventories, 04/09 (10:30): 1.952M prior

April 14 - Thursday
Initial Claims, 04/09 (08:30): 385K expected, 382K prior
Continuing Claims, 04/02 (08:30): 3700K expected, 3723K prior
PPI, March (08:30): 1.0% expected, 1.6% prior
Core PPI, March (08:30): 0.2% expected, 0.2% prior

April 15 - Friday
CPI, March (08:30): 0.5% expected, 0.5% prior
Core CPI, March (08:30): 0.2% expected, 0.2% prior
Empire Manufacturing, April (08:30): 15.0 expected, 17.5 prior
Net Long-Term TIC Fl, February (09:00): $51.5B prior
Industrial Production, March (09:15): 0.6% expected, 0.0% prior (revised from -0.1%)
Capacity Utilization, March (09:15): 77.4% expected, 77.0% prior (revised from 76.3%)
Michigan Sentiment, April (09:55): 66.0 expected, 67.5 prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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Monday, April 04, 2011

Country Embraces Socialism

SUMMARY:
{ Jobs report or not, stocks perform as expected, providing us opportunity to work our plan and take some more gain.
{ China PMI, M&A activity set the stage for a better, partially that is, jobs report.
{ My how the jobs picture has changed as our country has embraced socialism.
{ US PMI remains solid though misses its expectations.
{ SP500, DJ30 bumping February highs, unable to punch through even on the jobs data.
{ Running out of room at the prior highs or will the Fed liquidity continue to overcome world events and buoy stocks?

MARKET SUMMARY

Stocks stick to our plan.

It did not matter whether the jobs report was there or not. Stocks performed per our plan, allowing us to catch more upside and bank some more gain. I always love it when a plan comes together. The stock market got a decent jobs report that showed over 200K jobs in the nonfarm payroll sector, and the private sector put in 230K jobs. The unemployment rate fell to 8.8%. While that is dubious, it was still good enough news for the market. It gapped higher as we were looking for it to do. It rallied through mid-morning and allowed us to bank a lot of gain on the session.

There was some selling as we expected. There was profit taking late in the day. Traders who had moved with the market on this nice run to the upside decided it was time to bank some gain. SP500 got through the March peak and ran out of steam as it approached the February peak. It sold way off of its high on the session.

Some late buying in the last hour helped push all the indices back up and keep them positive except for the semiconductor index; it closed down -1%. It is looking a bit winded, but they all closed positive and allowed us the opportunity to take that extra gain. I will talk about their patterns in a bit. Some of them are questionable, but the market did what we wanted on Friday, so I have no complaints.

NASDAQ, +0.3%; SP500, +0.5%; Dow, +0.46%; SP600, +0.3%; SOX, -1%; NASDAQ 100, +0.2%


OTHER MARKETS

Dollar: 1.4224 Euro versus 1.4162. The dollar was down. It had been surging premarket at 1.4106 Euro. Very solid. It surged on the good economic news; if the US economy is recovering, the dollar will, of course, be worth more. The other factor is the Fed. It would not be as necessary for the Fed to continue with Quantitative Easing beyond this second round, the QE II. But the dollar was unable to hold those moves, and it reversed.

There is a resistance line drawn there. I did not draw that in after today's action. That was drawn in long ago, looking at the October closing low back in 2010. It closed at that level, danced off of it some other times (including in February), and it touched it and rolled back down. That is not a sign of strength. Of course I do not have to tell you that. The dollar is having its troubles. Maybe investors did not believe that the jobs report was as good as the first-blush rally would have suggested. Maybe not. The dollar has a lot of reasons to be concerned about the future.

http://investmenthouse.com/ihmedia/dxy0.jpeg


Bonds: 3.44% versus 3.46% 10 year US Treasury. You would expect bonds to have sold off aggressively given the stronger economic news, and they did sell off. They gapped lower, but they did not take out the recent lows and they recovered. The 10 year was stronger on the session with good economic data. That tells us there is still something bugging the bond market. What everyone heralded as good news X well, almost everyone X was not enough to keep bonds down.

http://investmenthouse.com/ihmedia/tlt.jpeg


Gold: $1,428.10, -11.90. Gold closed significantly lower. Gold was down fairly aggressively on the day. It still, however, remains in this consolidation and sitting on top of the three prior peaks. Gold does not look like it is about to roll over. With stronger US data, you would think gold would be under pressure because there would be less need for the Fed to continue Quantitative Easing. That would help overall stocks and other equities while diminishing gold. Gold is somewhat of an inflation play, and if the Fed can eliminate or limit its inflationary actions, gold would suffer.

http://investmenthouse.com/ihmedia/xgld.jpeg


Oil: $107.94, +1.24. Oil closed higher. Very solid. It topped at $108 during the day. These charts show it was higher than $108, but that is after the fact. It was a good session for oil, no doubt, as it breaks to a new high. It did not look like it would roll over. It had this double top where it came back and tested, but it just did not test as far as we thought it would. We thought it might come back to the 20 day. Instead it bounced off the 10 day EMA and made a new high. Oil continues to surge. It will be a long, high-priced summer in terms of gasoline. I am afraid, as Walmart told us on Thursday, a lot of other things will be higher in price as well. Walmart is seeing inflation really take hold and start to gin up consumer prices.

Coming from Walmart, that is interesting. Anyone who has dealt with them knows that the company is very persnickety with its suppliers. It is constantly urging them X well, I put that too nicely. It harasses them to lower their prices. If Walmart finally says prices are going up, you know its suppliers have said they cannot cut prices anymore. They will have to raise them.

http://investmenthouse.com/ihmedia/xoil.jpeg


TECHNICAL SUMMARY

INTERNALS.

Volume. Volume was mixed. It rose to 2.1B on NASDAQ, up almost 10%. It fell to 910M, down 15% on the NYSE.

Breadth. Breadth was rather anemic as it has been all week. 1.2:1 on the NASDAQ, and 2.4:1 on the NYSE. As those small and mid caps helped bolster the exchange breadth all week long.


CHARTS

SP500. I am looking at a volatility chart versus the orange SP500. As volatility spiked back in late February, the SP500 started to get rocky. Volatility was basically low during the rise, and then it spiked up just as the market cracked lower. That is exactly the action you would expect to see. As SP500 fell to its low on that pullback, volatility hit its peak. Then as the SP500 righted itself and rallied back up toward that prior peak, volatility has fallen off. It has not gotten to the lows of December, January, and February, but it is holding right above them. It is in spitting distance.

Looking at SP500 all by its lonesome, you can see that it did move over the early-March peak. It did not take out the February peak, and then it closed off of its high. A significant close off of the high, showing something of a doji on the candlestick chart.

There is not much instruction from MACD because it was unable to make a new high. You can maybe surmise that as it moved just past the early-March peak it was a lower MACD, but that is a tough read. We do have an ABCD pattern that is rallying, getting back up near the A point. What do you expect in those? When it gets near the A point, it will have a bit of struggle. We may see, after this good two-and-a-half to three-week run, we may see that the SP500 is going to struggle. Maybe it will come back and test early next week before it continues. Makes perfect sense. It has had a good run to the end of the quarter on tape painting. It would be normal for it to pull back and kiss the rising 10 or 20 day EMA.

NASDAQ. NASDAQ showed similar action. It was unable to move through the March peak. It gapped higher and reversed off a lot of its gain on the day. It closed positive, but showed something of a loose doji. Same three week run, roughly the same test of the March and February resistance. It would be normal for it to fall back, regroup a little after the tape painting, and see if it can make the next move higher. It is missing some help from key areas.

SP600. SP600 gapped to a new high, showing something of an evening star doji on the candlestick pattern. That is where it gaps to the upside, rallies, and falls back. It did not close negative, and it does not have to. Now we see, if it gaps lower, it has some near term weakens. Is that frightening? Shocking? No. It moved to a new high. It gapped and rallied over the old peaks. Coming back to test them would be quite normal indeed. If it holds that test and continues upside, that is fantastic. That is a great indication for the US economy. If it crashes and burns, rolling over and plunging to its death, that is obviously not a good thing. It is all about where it holds. If it can hold this old high or even the March peak and bounce from there, it is in great shape. We will have to see how it plays out. Small caps have been a very pleasant surprise along with their mid-cap brethren of late. Hard to complain about them.

SOX. The SOX looks a little decrepit. It rallied, yes, but it barely got through the 50 day EMA before it started to struggle. It never even scared the March peak, and forget about February. It did not even make the January peak. That could be part of a head and shoulders, but it would be a hunchback head and shoulders. In any event, it broke back below the 50 day EMA, and there was a bit of volume there. Perhaps we have something of a downside ABCD pattern in the works. That is just the opposite where you make a higher low and a higher high versus that lower high and lower low. There is selloff, it bounced, tested, and it bounced again. That is all inside of this early-March selloff. Maybe it will sell down. If it does, the first target is down near the March low.

In sum, the indices are a bit overdone right now. Even the small caps that have been the best performer over the past three weeks. They broke to a new high, but they are extended. A test is normal. NASDAQ and SP500 have some very interesting tests to make because they never made the new high. We will see how they perform and whether they roll over hard or just have a normal pullback.


LEADERSHIP

Technology. SSYS had a very strong session. What a solid week. It broke above the prior trading range and had very solid action. Love that high-volume break. RAX has a good week as well. Not necessarily surging on Friday, but it had a very good week and a half, breaking to a new rally high. Not all of the moves in technology were so stellar. AAPL broke back down to the 50 day EMA on Friday. It is not breaking down, but definitely not looking all that strong. GOOG had rallied on the latter part of the week. Not bad at all. It bounced off of an old support level. It tested, filling part of that gap, and it held it. It just broke below it, and it looks like it filled most of the gap now that I look at it again. It filled a lot of it, and then it rallied higher.

We will see if it continues higher. Volume sure was low. There is a sharp selloff, a bounce, a higher low and a higher high. A gap to the 50 day EMA, rallied through it, and then fell back to close below that level. ABCD. We will be watching that potential downside play on GOOG. Would that be one where we are expecting a massive rollover? Not necessarily. A play down to the 200 day EMA looks about right. It is bumping up against some serious resistance. Just thought I would throw that out there and let you chew it over. The ABCDs work both ways.

Financial. GS was trying to bounce back up, and it ran into some resistance. It hit the 50 day EMA on the high, fell back. Still an upside day; it held some of the gap. Questionable. WFC is another questionable bank. Not for its pattern, but for what it is doing here. It looks decent from the pattern. Its practices are not that great, and what is questionable is its CEO saying they are giving all lenders a "second look." I know many small businesses that bank at WFC and have gone there looking for money. They did not get even the first sit down let alone a second look. But I digress. It is a nice pattern at the 50 day EMA, flattening out. Maybe it will provide a bounce (finally).

Industrial. CAT continues its strong move, up another 1.6% on Friday. You cannot keep that stock down. DE is still running as well. It is trying to run with the cats and was showing excellent volume Thursday and Friday, gapping to the upside and rallying quite nicely.

Energy. Energy had a great time the past two weeks. We took a little off the table on Friday. HAL gapped higher and sold lower. Classic near-term, profit-taking move. FTO is holding its own and still looking solid in the refining area. CHK cannot seem to get off of its own feet. It is just sitting at the 20 day EMA, working laterally the past three weeks.

Retail. Retail has been solid. BWLD is making a nice higher low at the 10 day EMA. It might be worth positions if you are not in it yet. It might be worth more positions if you are in it as it sets up something of a triangle. Not bad at all. LULU announced a stock split on the week. It rallied to the upside and moved laterally Wednesday, Thursday, and Friday. Still looks very good here. We took a little bit of interim gain off the table just in case Monday does not prove so kind to it and other stocks that have performed well. SHLD had a good move Wednesday, and then it faded Thursday and Friday. Perfect. Back down to the 20 day EMA, and in great shape to move higher.

What does all of this tell us? It tells us there are still stocks in good position to move higher. It also shows there are stocks such as CAT and its ilk that are still running higher but are not exactly in good buy positions. Overall the market indices look as if they are bumping into resistance, but some great leadership refuses to say down. It continues to move to the upside, and that is a continued bullish indication for the market overall. Not to mention it is great action in the small caps as well. Maybe near term they need a pullback, but the leadership (and a lot of it is the same leadership) still looks very solid.

THE ECONOMY

To view the Economy Video use the following link:

Flash: http://investmenthouse1.com/ihmedia/f/eco/eco.html


THE MARKET

VIX. The VIX fell sharply this week after the early-week issues. It gapped lower on Friday, recovered, but was still down on the session. It is back down in this range where the market peaked out a bit and started to fall. That drove the VIX back up. We will see if it has the same effect. As we look at the charts, you will note they are approaching those early-March peaks. Look where the VIX was when it was there. Very interesting.

VIX: 17.4; -0.34
VXN: 19.41; -0.33
VXO: 15.95; -0.5

Put/Call Ratio (CBOE): 0.89; +0.02

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 does not have the cash to drive it higher.

Bulls: 51.6% versus 50.6%. Recovering but below the recent high at 52.2%. Investors remain a bit skeptical as SP500 tests the February highs with sentiment lower than it was during that month. Bulls peaked in late December on this upside leg and have made lower highs since. Still high overall but not necessarily bearish. Hit 55.1% in January and 58.8% on the December high on this leg. Still at a high level in a string of high readings but below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. This is where you start to be careful and watch for breakdowns, but there is also a lot of liquidity being pushed into the market and that can continue the move despite excess bullishness. The crossover level at 29% bulls is long gone, but it did its job. The high on the last leg was 56.0% after starting at 35.6% on the low in February, the lowest it has been since July 2009 . . . until this last leg. 35% is the threshold level suggesting bullishness. Again, to be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 23.1% versus 22.4%. Despite the three week rise, some investors are more skeptical about a further move though they are not running away with worry. Up from 19.5% to start March. Moving back up toward 23.3% hit mid-February, still well below the 28.3% in September 2010. The 37.7% peak at the height of the crossover is well in the rearview mirror but bears remain well below the 35% level, above which is considered bullish for the market overall. Hit 18.7% on the low in April. Hit a high of 27.8% level on the prior leg in February. For reference, cracking above the 35% threshold considered bullish. Hit a high on the prior run at 47.2%. For more 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: +8.53 points (+0.31%) to close at 2789.6
Volume: 2.134B (+9.7%)

Up Volume: 1.05B (+159.77M)
Down Volume: 1.01B (-10M)

A/D and Hi/Lo: Advancers led 1.25 to 1
Previous Session: Advancers led 1.34 to 1

New Highs: 252 (+56)
New Lows: 28 (-8)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg


SP500/NYSE

Stats: +6.58 points (+0.5%) to close at 1332.41
NYSE Volume: 910.49M (-15.7%)

Up Volume: 659.08M (+220.19M)
Down Volume: 227.56M (-396.02M)

A/D and Hi/Lo: Advancers led 2.39 to 1
Previous Session: Advancers led 1.41 to 1

New Highs: 579 (+215)
New Lows: 60 (+9)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg


DJ30

Stats: +56.99 points (+0.46%) to close at 12376.72
Volume DJ30: 148M shares Friday versus 186M shares Thursday.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg


MONDAY

Next week the market starts off looking at a little bit of economic data. It does not begin until Tuesday with the ISM services and the Fed minutes. We will see just how many people on the Fed are looking to lay off after QE II ends. There is not a lot of data on Wednesday X crude inventories, the mortgage index. Initial jobless claims come in on Thursday. There are some consumer credit and wholesale inventories on Friday. A very light week in terms of economic data. More importantly, earnings are about to start. It is already April 4th come Monday. That means we have to start thinking about AA and its traditional kick off to earnings season.

What will stocks do? On Friday they had a good session, so to speak. They closed well off the high. The Dow 30 and the SP500 are butting heads up against the February highs, and thus far they have been unable to punch through. The jobs data was pretty good. Everyone was giving it a big cheer, but it was unable to hold the indices at their session highs, and it was unable to take out important resistance. Maybe they have run out of gas here. Maybe they put in all the effort on the three-week rally that recovered back up to the jobs number.

What drives stocks from here? There are earnings. Stocks could give back some ahead of that, and SP500 and the Dow may be indicating that they want to do that. We might get some good buy positions if that happens. We may get pullbacks to the 50 day EMA that allow stocks to move. Remember, there are still a lot of good stocks out. They are showing good patterns that are not necessarily overextended or that can rally to the upside. We can use those as vehicles on a continuing move.

We would really like to see some kind of giveback first, particularly heading into earnings. Otherwise you have the market hanging out up at the old highs on some low-volume moves to that level. If they get some data that is not great, they may get sold back aggressively. Further, if they get some data that is good right off the bat, they can rally further but then sell aggressively given they have had no giveback after this move. We will have to see how it plays out.

The first part of this week will tell some of the story for the near term action. The sellers kind of showed their hand on Friday. They came down and pushed the market around some, but they were not able to win the session out. Indeed, buyers came right back in late on Friday. You might wonder why they were coming in, but there is money still to be put into the market.

Oh, yes. The money. That is the Fed liquidity, and it is still there. QE II is winding down, and there have been four Fed officials saying they need to reconsider whether to continue with QE II and definitely any Quantitative Easing after that. Some suggest not only ending that program but raising interest rates by 75BP in the near term.

There are the hawks out there that say we have to throttle back on all of this liquidity. How does that impact the market? Obviously, to this point, investors have not been buying into the fact that liquidity will be withdrawn. It will be, and everyone knows that; the question is when. The sixty-four billion dollar question is what effect that has on the market in the interim as the knowledge becomes more accepted that the Fed is getting ready to end Quantitative Easing. That is where it really gets interesting, and we will just have to see. Thus far the market has brushed it off. At some point it will have to deal with it because the Fed will eventually remove that liquidity.

This is a good point to start watching. We have SP500 and the Dow coming up to these prior peaks in February. They have not broken through yet, and a little pullback is good. Where do they go from there? Can the SP500 break through the A point and continue on with the pattern having beaten the odds with an ABCD? It could, no doubt about it. If the economy continues to improve, if it picks up faster, then it could overcome some of the liquidity drain when the Fed ends its Quantitative Easing programs.

Right now, I simply do not think the economy is strong enough to do that. But we still have that SP600 that has moved to a new high, and decisively so. Perhaps it is forecasting that the economy will be strong enough to offset the start of the withdrawal of liquidity by the Fed. The Fed is not going to remove it all at once. It will not pull a Greenspan from back in March of 2000 when it called back all of its money overnight. That sent the market into vapor lock and the economy afterward. It will withdraw gradually, but it also has to withdraw at a reasonable pace given the worries about inflation. Bernanke is not worried about it, but Walmart is. Who deals with more costs on a daily basis and has a better figure on the actual, real-world inflation picture? You make the call. Walmart is pretty much on the ball with respect to pricing.

In any event, things start to get a bit more interesting now. The plan worked just fine. Stocks ran up to the end of the quarter, and we were able to bank some nice gain. We still have some excellent positions that show no fear. In other words, they show no sign that they are weakening. We will see how they fare after a pullback early this week. A pullback is likely coming. How the market weathers it will tell the story about the next moves in this market X this market that has thus far defied the odds, defied the geopolitical turmoil, and even five calls by Fed officials to start withdrawing the liquidity. Someday it will have to face that music, and we will see whether it has the character to continue higher. Of course, in this instance, character equates with economic strength. I will see you on Monday to see how this puzzle plays out.

Have a great weekend!


Support and Resistance

NASDAQ: Closed at 2789.60

Resistance:
2796 is the February gap down point
2802 is the early March peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak

Support:
2762 is the February low
2729 is the 127% Fibonacci extension of the August 2010 run
The 50 day EMA at 2724
2705 is the February 2011 and consolidation low
2686 is the recent January 2011 closing low
2676 is the January 2010 low
2645-2650ish from December 2010 consolidation
2603 is the March 2011 low
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak
2550 from May and June 2008 peaks
2540 is the gap up point from early November
2535.28 is the April 2010 intraday peak
2530 is the April 2010 closing peak
2518 is interim peak from April 2010
The 200 day SMA at 2491
The November 2010 low at 2460


S&P 500: Closed at 1332.41
Resistance:
1332 is the early March peak
1344 is the February 2011 peak
1364 is the March 2007 low
1370 is the August 2007 low

Support:
1325-27 is the March 2008 closing low and the May 2006 peak. Bending.
1313 from the August 2008 interim peak
The 50 day EMA at 1300
1294 is the February 2011 and the consolidation low
1275 is the January 2010 low, early January 2011 peak
1255 is the late December 2010 consolidation range
1249 is the March 2011 low
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak
The 200 day SMA at 1195
1185 from late September 2008
1174 is the May 2010 high, 78% Fibonacci retracement of April peak
1173 is the November 2010 low
1170 is the prior March 2010 high
1156 is the Sept 2008 low
1151 is the January 2010 peak
1133 from a September 2008 intraday low
Bottom of the January 2010 consolidation 1131 to 1136
1129 to 1131 is the June and August 2010 peaks


Dow: Closed at 12,376.72
Resistance:
12,391 is the February 2011 peak
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,283 is the March 2011 peak
12,110 from the March 2007 closing low
The 50 day EMA at 12,036
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak
11,258 is the April 2010 peak
11,205 is the April closing high
The 200 day SMA at 11,169
11,100 from the 7-08 low
10,963 is the July 2008 low
10,920 is the recent May high
10,730 is the January 2010 peak


Economic Calendar

March 28 - Monday
Personal Income, February (08:30): 0.3% actual versus 0.3% expected, 1.2% prior (revised from 1.0%)
Personal Spending, February (08:30): 0.7% actual versus 0.5% expected, 0.3% prior (revised from 0.2%)
PCE Prices - Core, February (08:30): 0.2% actual versus 0.2% expected, 0.1% prior
Pending Home Sales, February (10:00): 2.1% actual versus 0.3% expected, -2.8% prior

March 29 - Tuesday
Case-Shiller 20-city, January (09:00): -3.06% actual versus -3.3% expected, -2.43% prior (revised from -2.38%)
Consumer Confidence, March (10:00): 63.4 actual versus 65.0 expected, 72.0 prior (revised from 70.4)

March 30 - Wednesday
MBA Mortgage Index, 03/25 (07:00): -7.5% actual versus +2.7% prior
Challenger Job Cuts, March (07:30): -38.6% actual versus 20% prior
ADP Employment Change, March (08:15): 201K actual versus 210K expected, 208K prior (revised from 217K)
Crude Inventories, 03/26 (10:30): 2.945M actual versus 2.131M prior

March 31 - Thursday
Initial Claims, 03/26 (08:30): 388K actual versus 383K expected, 394K prior (revised from 382K)
Continuing Claims, 03/19 (08:30): 3714K actual versus 3700K expected, 3765K prior (revised from 3721K)
Chicago PMI, March (09:45): 70.6 actual versus 69.5 expected, 71.2 prior
Factory Orders, February (10:00): -0.1% actual versus 0.4% expected, 3.3% prior (revised from 3.1%)

April 01 - Friday
Nonfarm Payrolls, March (08:30): 216K actual versus 185K expected, 194K prior (revised from 192K)
Nonfarm Private Payrolls, March (08:30): 230K actual versus 203K expected, 240K prior (revised from 222K)
Unemployment Rate, March (08:30): 8.8% actual versus 8.9% expected, 8.9% prior
Hourly Earnings, March (08:30): 0.0% actual versus 0.2% expected, 0.0% prior
Average Workweek, March (08:30): 34.3 actual versus 34.3 expected, 34.3 prior (revised from 34.2)
ISM Index, March (10:00): 61.2 actual versus 61.4 expected, 61.4 prior
Construction Spending, February (10:00): -1.4% actual versus -0.7% expected, -1.8% prior (revised from -0.7%)
Auto Sales, April (15:00): 4.61M prior
Truck Sales, April (15:00): 5.61M prior

April 05 - Tuesday
ISM Services, March (10:00): 59.5 expected, 59.7 prior
Fed Minutes, March 15 (14:00)

April 06 - Wednesday
MBA Mortgage Index, 04/01 (07:00): -7.5% prior
Crude Inventories, 04/02 (10:30): 2.945M prior

April 07 - Thursday
Initial Claims, 04/02 (08:30): 388K expected, 388K prior
Continuing Claims, 03/26 (08:30): 3700K expected, 3714K prior
Consumer Credit, February (15:00): $3.6B expected, $5.0B prior

April 08 - Friday
Wholesale Inventories, February (10:00): 1.0% expected, 1.1% prior

By: Jon Johnson, Editor
Copyright 2011 | All Rights Reserved

Jon Johnson is the Editor of The Daily at InvestmentHouse.com

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