Stocks Rally on Views of Soft Landing

- Stocks rally on views of a pause and soft landing, but volume continues to lag.
- Q2 GDP helps spark a market rally, but the numbers are not that pleasant.
- Showing momentum ahead of Fed pause, but thus far lacking strong buying heading into another week heavy on earnings, economic data.

Look, up in the sky, it’s the Fed ending its rate hikes.

Certainly that was the idea Friday with Q2 GDP coming in at 2.5%, much less than expected. More to the point, there were many statements that a soft landing was taking place. Bonds had rallied all week, pushing the yields closer and closer to 5%. The GDP data basically sealed the deal Friday with the 2 year closing at 4.97% and the 10 year at 4.99%. The curve reverted to positive by a hair, a good sign, but as noted Thursday, rates are overall very low when compared to a 5.25% Fed Funds rate. That is telling you two things. First, the Fed is indeed done as the Fed Funds futures contract estimates less than a 30% chance of a rate hike on August 8. Second, its telling you that money is too tight given the deteriorating economic conditions and some economic slowing is ahead if the current pace holds. If the Fed backs off perhaps some confidence is restored and the economic investment can continue and thus a resumption in growth.

That is what bulls were talking about Friday with their ‘soft landing’ predictions. At 2.5% they figured if the Fed halted its hikes then things should pick back up a la 1995 and everyone is happy at Christmas. To that end stocks started higher on the bell. A good early surge was followed by a test as the leading DJ30 and SP500 climbed near the July highs and started to waffle. Volume was running lower and that looked as if it could be a problem for a continued move. Stocks caught their second wind, however, rallying into the afternoon with SP500 and DJ30 closing right at the July highs. Even NASDAQ and SOX helped out, moving through near resistance for the first time in two months. After earnings guidance failed to spark a rally and indeed led to selling, it took the idea the Fed would stop rate hikes to get the market back into recovery mode.

To keep it going, however, economic growth will need to pick up. As noted, earnings guidance has been tepid despite 14.5% earnings growth year/year and 70% beating estimates. The market is not being kind to companies in the current economic environment either; if you guide lower you are slaughtered. IBD reports that 39 $10+ stocks suffered a 20+% one day loss the past three weeks. Seventy-six fell 15%, and 185 dropped 10% in one day. That is brutal. In addition, stocks have sold off, bonds have rallied to ridiculous levels versus the Fed Funds rate, and transports, always a leading indicator, have been clocked. They just managed to recover the 200 day SMA on the Friday rally. As if that were not enough, inflation is still showing signs of life with a jumping PCE, and business investment is lower.

Technical action not strong but doing what needs to be done.

Technically it was nice price day. The NYSE indices finally made it to where we said a couple of weeks ago we would like to see them, i.e. the July highs. They acted as if they didn’t want to do it, but the past week picked up some headway. That complements the price pattern on SP500 and DJ30 as they are now at the ‘hump’ in the double bottom patterns that formed with their bottoms in June and July. They even had some help from NASDAQ and SOX as both broke through the 18 day EMA, finally trying to give that long awaited higher bounce in their downtrends.

That last party kind of sums up the move for the week, however. Though prices rose, volume was not kind. Monday’s strong price move was on low volume. Tuesday trade was up but still below average. Wednesday the market churned and lost some ground on above average volume. Thursday they sold on higher volume. Friday’s nice move started the week as it finished: up but disappointing trade levels. In sum, simply not much volume support, indeed some distribution. The buyers were in control, but there were not that many slinging money back into the market.

Leadership tells a lot of the story. There has not been much. Friday there was definitely positive movement in some leadership caliber stocks that are not in too bad of shape. Many, however, still need more work before they are ready to sustain a rally, but they are working on it. While the buying strength has not been what you would want, the fact that the leaders are forming up, massing at the borders so to speak, indicates there is some positive build ongoing

The likely outcome.

The market typically factors in the end of a Fed rate hiking campaign before the actual event. With bonds rallying all week the stock market started factoring in the end as well. NASDAQ and SOX were due for a bounce as well, and they look to be finally making that move, adding some support to the SP500 and DJ30 moves.

Of course, what is factored in ahead of the event is typically taken out some after the fact. After all, Fed rate hikes can take a year to impact the economy, and simply saying ‘we are done’ has some immediate impact, but after that there are still rate hikes out there on their way down to land on the economy. Stopping the hikes won’t change the immediate course of the economy.

Thus after the pause or stop or whatever you want to call it the market will have to get over the excitement of the Fed getting off its back and then deal with the reality of where the economy really is. That will lead to a test where those patterns that started to build during the pre-Fed run will test back. That is likely where the bottom will be set unless it turns out the Fed just went too far given all of the other economic factors (e.g., energy, housing, war). After all, we had an inverted to flat bond curve for over a month, and that was AFTER the inversion in 2005 and early 2006 that was argued to be caused by foreign buying of treasuries.

There is an economic slowdown in progress, and it is likely to continue through Q3. If the Fed is done, however, the economy will likely recover and the market will start pricing that in ahead of the event. Thus the timing of another test after a pre-pause run is just about right for a ‘typical’ year of a bottom in Q3. Of course we have to watch the price/volume action as it unfolds, and very importantly, how leadership continues to develop during that period.

THE ECONOMY

GDP drop rounds out a week of definitely mixed economic data.

From surging durable goods orders to a lower than expected GDP gain in Q2, the week was again all over the map regarding economic data. Of course GPD received the headlines to end the week, particularly given that it showed a lower 2.5% reading than expected (3.0%). That prompted the ‘soft landing’ commentary noted above, even getting the IMF to chime in that the US could have a soft landing if it stayed on top of inflation. Well gee whiz, if the IMF says its so then it must be 180 degrees from reality.

GDP breakdown shows the quarter was not that great.

Despite the hope of a Fed cessation resulting from the lower GDP growth number, the GDP numbers were not very positive, and indeed, one would almost wonder why the market would rally based on the results. Specifically, inflation concerns were compounded with a much higher than expected PCE (personal consumption expenditures), coming in at 4.1%, an all-time high. Even the core was smoking, coming in at 2.9% versus 2.0% before. That is the highest level since 1994 when the Fed was also in a tightening cycle. Further, the Employment Cost Index rose 0.9%, the highest in five quarters. Instead of dwelling on the Fed’s favorite indicator (PCE) or the labor market, stock investors focused on the bond market rally as reason for a Fed halt.

Business investment, the missing ingredient in the 2001 recession, helped lead the economy back after solid investment incentives in the second round of tax cuts restarted business spending. Since then it has been a mainstay of the economy, and indeed many pundits are saying that when the consumer slows, as he has started to do (2.5% growth in Q2 versus 4.8% in Q1), it will be business spending that keeps the economy going. After all, corporate balance sheets are loaded with cash as we hear every day on the financial stations, so they should spend, spend, spend and keep us all happy. Well, they were not spending as much in Q2 with capital spending falling to 2.7%, the smallest gain since early 2004 and far behind the 13.7% registered in Q1. While overall business buying slowed, spending on equipment and software actually declined.

Thus we are starting to see not only slowing growth rates but declines in some areas as the GDP growth rate was almost cut in half from Q1 to Q2. Meanwhile the Fed’s inflation indicators continue to rise, but as we have discussed in the past, those are lagging. As the economy slows, inflation will climb, peaking after the economy. Thus while the readings were higher, they don’t necessarily suggest any big change in the lay of the land: the economy is slowing as we have noted, and inflation that was allowed to jump up due to easy liquidity, is still climbing based on some reports. As we have noted, however, ECRI says that inflation peaked in October 2005 and pressures are actually declining despite the bump higher in the Q2 GDP report.

The market may have gotten ahead of itself with this rally on the likelihood of a Fed pause given the slowing economic data, but as usual there are underlying fundamentals for the rally. It senses the Fed is almost done and it also realizes that very accurate economic forecasting models such as ECRI still suggest just a slowdown and no recession in the economy. After two years of Fed rate hiking, the market is more than happy to come away with economic slowing as opposed to a recession. All things considered, that was reason to rally.

THE MARKET

MARKET SENTIMENT

VIX: 14.33; -0.61
VXN: 19.26; -1.53
VXO: 13.44; -1

Put/Call Ratio (CBOE): 0.88; -0.17. After a series of closes above 1.0 the put/call ratio eased back during the Friday rally.

Bulls versus Bears:

Bulls: 42.2%. Bumped back up to the level two weeks back as bulls are in a lateral holding pattern. (42.1% last wee, 42.2% the week before). There was a big spike higher from 38.7% two weeks back, but we hoped for more here. At this level we note it is below the levels hit on the last market sell offs. On the last pullback bulls hit the lows for this rally, i.e. since 2003. That put it below the 42.3% hit on the last low and the May and October 2005 readings that preceded new upside runs.

Bears: 34.5%. Bears are moving higher the market sold off and then rebounded. Up from 33.7% last week and 33.3% the week before. Still lower than the 34.4% hit three weeks back, but on the climb again. Kissed the bulls to end June, just missing crossing over with the bulls, but that in itself is not a bad indication for the upside. Hit a new post-2002 high in that late June move, eclipsing the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).

NASDAQ

Stats: +39.67 points (+1.93%) to close at 2094.14
Volume: 1.877B (-14.08%). Substantial volume decline dropped volume back to below average on what many said was an important move. Without the volume it as not that important, however. Sure it was a summertime Friday, but what about all of the other days NASDAQ moved higher on lower volume? One day can be an exception. Several days start making the rule. Last week volume was basically down when it needed to be up, and up when it needed to be down (i.e., on the down days).

Up Volume: 1.54B (+778M). Those that were in the market were buyers.
Down Volume: 326M (-1.079B)

A/D and Hi/Lo: Advancers led 2.32 to 1. Solid advancing breadth as NASDAQ actually recovered through its 18 day EMA and brought more covering into play.
Previous Session: Decliners led 1.66 to 1

New Highs: 83 (+10)
New Lows: 101 (-28)

The Chart: (Click to view the chart)

NASDAQ made its first push through the 18 day EMA (2080) since early July before the earnings tumble lower. That clears near resistance in its downtrend, and when it did not hold and confirm a more severe downtrend, the shorts started to cover, and that helped push NASDAQ even higher. Looks as if 2100 is going to be tested, and if the pre-FOMC pause rally continues, the 50 day EMA (2131) is definitely in play. That would be the lick log for NASDAQ. It stalled at the 50 day on its last rebound attempt, and if it fails there again it will have established a rather well-defined downtrend. That would really keep us on alert for a longer market decline as a leading growth area would have confirmed its downtrend. For now, more of a bump higher appears appropriate ahead of the Fed.

SOX (+3.04%) surged through the 18 day EMA (410.72), clearing it on the close for the first time since early May when the selling really started to get ugly. After that long decline it finally looks ready to make its higher bounce in its downtrend to test higher resistance near the 50 day EMA (436.61).

SP500/NYSE

Stats: +15.35 points (+1.22%) to close at 1278.55
NYSE Volume: 1.689B (-7.2%). Volume could not match the price action as SP500 in particular enjoyed a nice price day. Trade declined but managed to hold average, much better showing than on NASDAQ. NYSE suffered some distribution last week, but not as much as NASDAQ. Pretty much in line with the differences in performance of the two indices the past couple of months.

A/D and Hi/Lo: Advancers led 4.05 to 1. Another very impressive breadth session as stocks were bought across the board. Volume did not match, and it has not matched, the upside breadth figures. They appear too volatile to us, too extreme whether to the upside or the downside, and that suggests the market is still in for more of a struggle.
Previous Session: Decliners led 1.31 to 1

New Highs: 120 (-1)
New Lows: 66 (-26)

The Chart: (Click to view the chart)

Came back from a mid-session wobble to close near the highs and just off the July high at 1280. After volume churned Wednesday and showed some distribution Friday, it was lower as SP500 made its grand move. It tapped right at 1280, but could not punch through without the volume. This is where we figured SP500 should get on this bounce and then do some more work laterally to build a handle and then try to move on. It sort of built the handle Wednesday and Thursday; not much of one, and of course volume was not low as you want in a handle. Thus the move remains a bit under a cloud, but with the FOMC meeting coming and an anticipated ‘no action’ vote, SP500 could push higher to 1290 and even 1300 ahead of the meeting before forming that handle. If that occurs over a 2 week period and then forms the handle, that would just be about perfect timing for a low in September and then a recovery and break higher that month or in October. A test higher will also put in the test of the crossover of the 50 day EMA over the 200 day SMA. Typically an index will make the break and then rebound; the 50 day EMA lags the move back up and thus we can see SP500 continue to rise but still see the crossover hold. That is another important point we are watching as the rebound continues.

SP600 (+1.96%) was stellar in its session gain, but with respect to its pattern it is still in the doghouse. Its pattern here more resembles a head and shoulders than a double bottom, and that is unfortunately in line with a slowing economy and a growth area in the market. That said, with the market bouncing its first test is the 50 day EMA (367) and the 200 day SMA (368), and there it is likely to find some serious resistance. How it reacts at that level will be something of a canary or leading indicator to the rest of the market.

DJ30

Similar to SP500, the blue chips rallied up to the July high (11,228), closing just off that mark. Lower, below average volume on the move; still not a lot of buyers pushing things higher, just more of them than sellers. A solid week for DJ30, the best move since 2004 or something like that. Nice double bottom pattern has set up and as with the other indices it can still run higher here with next resistance from 11,275 to 11,335 and then take time to form the handle.

Stats: +119.27 points (+1.07%) to close at 11219.7
Volume: 270M shares Friday versus 286M shares Thursday. Below average trade all week as DJ30 made its run. As with the other indices, upside volume was the obvious missing element.

The Chart: (Click to view the chart)

MONDAY

No Fed meeting until the following Tuesday. That means just more earnings and another boatload of economic data (Chicago PMI, personal income and spending, ISM, factory orders, and the jobs report.

The market has a lot to chew on once more as the leading indices, SP500 and DJ30 test the July highs. The market has some momentum after its best Dow week since the fall 2004, but the move lacked any volume. A Fed pause is a big incentive to rally further, but even with that idea starting to permeate the market, volume was still missing last week. Thus we can see the indices move higher to next resistance but unless more trade comes in the NYSE large caps start working on a handle to their double bottoms. At the same time we will watch how NASDAQ, SOX and the small caps react to next resistance in their continuing downtrends.

Thus despite the other factors this week the market has some momentum on the Fed anticipation. How long that lasts against lack of real volume on the move, continued earnings guidance, and leadership that still needs more recovery remains to be seen. Scanning several thousand charts this weekend we see some leadership caliber stocks moving into position to put together sustained rallies. We see many more still needing more time to set up, similar to the overall market. We also see a lot of chip and tech stocks that have rebounded, but remain in downtrends. On balance there is improvement, but we have to remain defensive in the sense we stay with well positioned stocks versus jumping into rebounds from downtrodden patterns. The market has rebounded but has not shown a lot of strength on the move, and that keeps it susceptible to another turn lower after this rebound stalls. Even if it does, that is part of the rebuilding process for the next sustained run higher.

Support and Resistance

NASDAQ: Closed at 2094.14
Resistance:
2100 from the early and mid-2005 peaks (and the 18 day EMA as well).
The 50 day EMA at 2131
2177 is the December 2004 high.
2185 to 2182 is the September 2005 peak and interim high from November 2005.
2190 is the July 2006 high

Support:
2072 is the June closing low
2050 from the summer 2005 lateral range lows.
2045-47 from June and October 2005 lows and June 2004 highs
2037 at the October 2005 closing low
2019 is the April 2005 interim high
2008 is the January 2005 low
1971 from an October 2005 peak and 1973 from a March 2005 low.

S&P 500: Closed at 1278.55
Resistance:
1272 to 1268 is the November and December 2005 closing highs and March 2006 closing low
1280 is the recent July peak.
The late January peak at 1285
The early June high at 1288
1297.57 is the recent February high.
1315 is the May and May 2001 peaks
1317, the recent intraday highs from April.
1324 to 1329 from the October 2000 lows.

Support:
The 200 day EMA at 1266
The 50 day EMA at 1263
1252 is an old trendline from the August 2003/August 2004/October 2005 lows.
1239 from the late June consolidation range.
1225 from the March 2005 high
1223 is the June 2006 closing low.
1213 from December 2004 high to 1215
1205 from the August lows

Dow: Closed at 11,219.70
Resistance:
11,228 is the July closing high.
11,279 is the late May high
The March 2006 highs at 11,329 to 11,335
11,350 from the May 2001 peak
11,401 from the September 2000 peak and April 2001 highs

Support:
11,097 to 11,137 is the last peak from the February top.
The 50 day SMA at 11,059
11,044 is the January high.
10,965 from Q4 2000
The 200 day SMA at 10,964
10,931 is the November 2005 high
10,890 is the December 2005 closing high.
10,737 to 10,730 from December and February lows
10,706 is the June 2006 closing low
10,705 – 10,965 from July/August 2005 range top to bottom
10,678 to 10,665

Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the ‘Economy’ section.

July 31
- Chicago PMI, July (10:00): 56.0 expected, 56.5 prior

August 1
- Personal Income, June (8:30): 0.7% expected, 0.4% prior
- Personal Spending, June (8:30): 0.4% expected, 0.4% prior
- Construction spending, June (10:00): 0.3% expected, -0.4% prior
- ISM Index, July (10:00): 53.5 expected, 53.8 prior

August 2
- Crude oil inventories

August 3
- Initial jobless claims 298K prior
- Factory Orders, June (10:00): 1.1%, 0.7% prior
- ISM services, July (10:00): 56.5 expected, 57.0 prior

August 4
- Non-farm payrolls, July (8:30): 145K expected, 121K prior
- Unemployment rate, July: 4.6% expected, 4.6% prior
- Hourly earnings, July (8:30): 0.3% expected, 0.5% prior
- Average workweek, July (8:30): 33.9 expected, 33.9 prior

By: Jon Johnson, Editor

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

Technorati tags: stock trading stock market investing

Gold and bonds continue to recover as global events spark gains

SUMMARY:
- No relief ahead of weekend but NASDAQ third leg lower is already long in the tooth.
- Friday shows more mixed economic signals, confusing some as to Fed's course. There should not be any confusion.
- Gold and bonds continue to recover as global events spark gains, but trend is still same & Fed will take note.
- After triggering further weakness, earnings set to trigger a rebound that was delayed last week.

More selling, not much covering ahead of weekend.

Investors had even more data to worry about Friday with further aggression in the Middle East, more warnings about the future (Borders, D.R. Horton, GE), and mediocre retail sales and sentiment. Basically more worries about the economy given the Fed, energy prices, world tensions, and a potentially weaker consumer.

Stocks started lower in a continuation of the prior selling but then tried a rebound into midday. We expected a rebound attempt ahead of the weekend, but this one never got any strength, just wandering up off the lows into the close. Not a lot of covering given expectations of more violence this weekend as Israel made it clear it would not let up while it soldiers were still captive.

Technically it was just more selling in the current leg lower with the normal summer attributes, i.e. lower volume. Breadth was lighter to the downside but still a negative 2:1. NASDAQ fell further past its June low, landing at the October 2005 lows where it bottomed and started a solid rally through April 2006. It has dropped 150 points on this leg, getting close to the 200 points or so on the prior two legs lower. In addition, SOX continues to act as if it is sold out with INTC, TXN, CYMI and other chips posting modest gains. Recall that SOX was positive mid-Thursday before the Middle East escalation. The rubber band is stretched and ready to snapback for a rebound move. The quality of the move remains to be seen.

SP500 and the NYSE indices may have something to say about that. They fell close to the June lows, still in position to set up a nice double bottom at those levels, though it will have to prove it as NASDAQ blew right on through on its attempt. With NASDAQ ready to rebound after another 50 points or so, the NYSE indices could continue lower to test the June lows and then be in position to actually form that double bottom.

There are still a lot of major issues ahead, and earnings are just getting underway. The harsh selling to this point decreases the likelihood of a lot more downside from here unless some really nasty news hits. Most likely the news turns out to be not as bad as feared with respect to earnings and stocks mount a decent relief move. If we get through the weekend without any further escalation of the war and get some halfway decent earnings news stocks will likely pop up. Of course, Bernanke speaks to Congress this week in his semiannual son of Humphrey-Hawkins testimony and the CPI is out as well. The market is ready to bounce in relief, but it still has to deal with harsh reality as well.


THE ECONOMY

Retail sales and sentiment lighter, but business sales sold. What is a Fed to do?

June sales fell 0.1% versus a 0.1% gain in May and well off the 0.4% expected. That was the first drop in four months. Ex-autos sales rose 0.3%, and that was as expected. Autos were the drag as gasoline sales rose 1.1%, reflecting a rise in prices and not a lot of drop off in usage. Take out autos and gas and sales rose 0.1%. Year over year sales rose 5.9%, not bad, but the slowest in four months. More money was diverted to gasoline as opposed to other areas.

Michigan preliminary sentiment for July fell to 83.0 versus the 85.5 expected and the 84.9 final in June. Usually there is not much correlation between sales and sentiment at these levels; it takes much lower sentiment to stall consumer spending.

There is, however, some worry in the business land, and that along with the consumer is a very necessary component of economic expansions. The NABE survey reports just 39% of businesses say demand is rising, down from 54% in January. Profit margin expansions, planned price hikes, and capital investment plans all hit multiyear lows. This is the first real sign of change in the business climate even as shows such as Kudlow & Company tout the strong expansion still to come. We have a lot of respect for Art Laffer, but the rosy view of the economy he and Kudlow are putting out is a bit overdone.

The economy is not falling apart, it just is not expanding as it was. There is still data that is moving higher, but there is more and more data that is stalling and some is heading down. That is not the recipe of an economy ready for a new expansion. Indeed, investors are concerned about both sides of the ledger. The S&P Retail Index hit a 14 month low Friday as restaurants, discounters (WMT, COST, TGT), home improvement, etc. all headed lower.

And the Fed should . . .

All of this weakness leads many to wonder what the Fed is going to do at the August meeting. Bernanke is going to update the Congress on monetary policy this week just as the new CPI figures come out. The Fed wants to quit hiking rates. The data are starting to scream it needs to quit hiking and sell some treasuries to sop up the remaining liquidity and then call it a day.

Again, however, the rest of the world is the problem. Inflation in the US peaked last October according to ECRI's forecasts, and they tend to be quite accurate. The Bank of Japan raised its rates 25BP Thursday, the first rise in six years after its economy fell into depression over 10 years ago. Japan had a habit of raising rates just as it tried to pull out of depression, and that kept its economy in the miso soup too long. That hike follows the BOJ's withdrawal of trillions of yen from the market in the last four months. Europe is drying up some of the liquidity, but it is still behind the curve as its inflation rate jumps and is at a 5.5 year high.

Foreign banks are working on the excess liquidity, and it has had an impact as seen in the decline in emerging markets. Many have lost their luster as easy money dried up and commodities prices fell. The 'financial tourism' so popular the past year has turned into a run for cover, and some of these countries that enjoyed the influx of foreign money are going to be hurt, particularly those with large deficits such as Turkey and Hungary.

The US has a high deficit, but recent action shows it is still the world's safe haven when times are troubled and friends just can't be found. We have watched gold and bonds, and both are rising as the world struggles with the new war in the Middle East, North Korean nukes, and Iranian ambitions. Gold is up as usual when war erupts, and bond yields are down as money seeks safety in US treasuries. The 2 year yield is down to 5.09% while the 10 year is at 5.06%. It looked as if it was just another economy related sell-off, but the drop in yields the past couple of days is also tied to the uncertainty the Middle East flare up. Of course, the curve is still inverted, and that is still an indication of economic weakening ahead; the action before this flight to safety this week showed that, and the economic data and earnings guidance is bearing that out to some extent.

With the mixed economic data and inverted curve, the Fed should take the heat off the US markets. We don't need to fall on the sword for the rest of the world, but if the Fed stops, other central banks will take its lead. Tough situation for the Fed to be in when the other world central banks are not fully cooperating or are just well behind the curve. Regardless, the Fed cannot afford to send us into recession; best to stop and at least wait awhile to see just how things pan out.


THE MARKET

MARKET SENTIMENT

VIX: 18.05; +0.26. Pretty tame move, and indeed, disappointing. Wanted to see another spike that really got the volatility rise jumping.
VXN: 24.62; -0.04
VXO: 18; +0.08

Put/Call Ratio (CBOE): 1.23; +0.1. Fourth session above 1.0 on the close as plenty of downside betting is ongoing. Overall it is a bit late in this leg to be starting a lot of downside positions. The fact that there is a lot of activity after 150 points on NASDAQ's downside move is a pretty good indication the rubber band is stretched about as far as it will go on this leg.

Bulls versus Bears:

Bulls: 42.2%. Big spike higher from 38.7% the week before, but that is going to get washed away after the results from the current week. Even at this level we note it is below the levels hit on the last market sell offs. On the last pullback bulls hit the lows for this rally, i.e. since 2003. That put it below the 42.3% hit on the last low and the May and October 2005 readings that preceded new upside runs.

Bears: 33.3%, down from 34.4%. Lower, meaning fewer bears. As with bulls, that will likely change after this week. Kissed the bulls three weeks back, just missing crossing over with the bulls, but that in itself is not a bad indication for the upside. Two weeks back Bears hit a new post-2002 high, eclipsing the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).

NASDAQ

Stats: -16.76 points (-0.82%) to close at 2037.35
Volume: 1.842B (-12.24%). Volume backed off to end the week after the Thursday distribution. Most of the selling has occurred on light volume so this is nothing new. The market suffered from a chronic lack of bids last week with some distribution sprinkled in.

Up Volume: 598M (+334M)
Down Volume: 1.202B (-617M)

A/D and Hi/Lo: Decliners led 2.13 to 1. Breadth was sharply negative all week and on the Tuesday bounce upside breadth was modest.
Previous Session: Decliners led 4.04 to 1

New Highs: 35 (0)
New Lows: 239 (+28). Not popping off enough lows.

The Chart: http://www.investmenthouse.com/cd/^ixic.html

NASDAQ was in the tank from the bell, slicing through some potential support at 2050 and on down to the October 2005 lows (2037 closing) where it bottomed. D j vu all over again? That was a 2.5 month sell off, and that is what we have here, though this one is nastier in terms of point loss. It bottomed then as earnings season got really underway, just as the market now (at least in terms of where we are in the earnings season). That makes this test a bit more interesting, and given that NASDAQ has dropped on this leg just about as much as the prior two legs and the last part of the drop has been straight down, we are going to see a rebound. Whether that is the bottom we will see.

SOX (-0.49%) was not ready to lead the charge, but its losses were minimal and on Thursday it was positive and ready to move before the war escalation hit the wire. Some big names notched modest gains Friday as well. It is poised to rebound and help bring NASDAQ along with it. It is still in that pernicious downtrend below the 18 day EMA (431), ready for a bigger rebound this time. NASDAQ and SOX will pull each other along.

SP500/NYSE

Stats: -6.1 points (-0.49%) to close at 1236.19
NYSE Volume: 1.717B (-3.51%). Volume was lower but still above average on NYSE, showing some more distribution action. It helped that the indices rebounded much better than NASDAQ; maybe some nibbling there, particularly when you look at the banks, energy, and some healthcare.

A/D and Hi/Lo: Decliners led 2.07 to 1. Bad but not horrid.
Previous Session: Decliners led 3.15 to 1

New Highs: 24 (-9)
New Lows: 220 (+38)

The Chart: http://investmenthouse.com/cd/^gspc.html

SP500 sold off to 1230 on the low, still holding above the June lows (1223 closing) on the dip. 1225 is the March 2005 high; reaching back a bit but there is something there. SP500 held on longer than NASDAQ in its pattern, and is playing catch up on this selling. Another dip lower by NASDAQ takes SP500 down to the June low as well, and that leaves both of them working together at a point ready to bounce higher.

The small cap SP600 (-0.91%) still took a beating, but it found support intraday just above its June 2006 and December 2005 lows and September and October 2005 interim highs at 352 to 350. A lot of support at this level, and SP600 bounced smartly off that support Friday. SP600 is a bit ahead of SP500 in getting to the point it can form a double bottom. This is roughly where it needs to hold to make its attempt at a double bottom.

DJ30

Similar to SP600, DJ30 hit the June lows intraday and bounced back some. A full test of that low as well as the lows from December 2005 and February 2006. This is where it tries a double bottom of its own. Some big names were getting smacked around Friday (e.g. UTX, BA, WMT, HON), however, not exactly an indication the index is ready to hold the line just yet.

Stats: -106.94 points (-0.99%) to close at 10739.35
Volume: 312M shares Friday versus 328M shares Thursday. Selling volume remained fairly strong given the light trade up to Thursday.

The chart: http://www.investmenthouse.com/cd/^dji.html

MONDAY

Lots of bad news last week with respect to earnings, the new war, the economy. This week there is earnings, the new war, and the economy. Bernanke speaks not once but twice to Congress re the economy and monetary policy. The CPI comes out Wednesday just as Bernanke speaks. Earnings will really hit the fan.

The potential is there for more of the same. Israel says it is going to step it up over the weekend. Earnings have yet to prove themselves though the season is hardly started. Economic reports are mixed at best, and at this point bad news really is bad news with respect to the economy.

On the other hand, the market has sold hard over the past two weeks and really hard to end last week. It was ready to bounce Thursday but was thwarted by the escalation in the war. If there is basically no change in that situation and we get some better earnings news the market is primed to rebound and rebound rather sharply. It is also in position to try and put in a bottom given the positioning of the indices. There are still issues about the economy in the future given the mature expansion hit by high energy prices and tighter money, but a bounce will deserve some scrutiny to see how strong it is. The question remains whether this is just a mid-run correction or the selling that marks the end of the post-2002 run higher. With the Fed action and historically high energy prices there is quite a bit of merit to the latter.

There is also a problem with leadership; a lot of it got hit, especially at the end of the week. There is still leadership, but it is defensive in nature, e.g. energy and healthcare. Yes some chips are trying to bounce along with some techs, but they are looking to bounce from a slaughter and not from good patterns.

It is also an unusual time for the market to find the bottom for the year, but the climate out there is also quite unusual what with the pummeling the market is taking from all sides. Indeed, Mark Haynes on CNBC said he could not recall a time when the market was confronted by so many different events. Must be the case. He is a lawyer, after all. Bottoms are often born in the midst of the worst imaginable times. North Korea, Iran, the new war, the Fed, high energy prices, bird flu, earnings scares, Barry Bonds crying, doping scandal at the star of Le Tour de France. The list goes on.

In sum we anticipate a rebound attempt this week; the one we expected last week got started just to get bumped in favor of a new war. Things are bad enough to actually make this last test, the third leg lower in the selling, the bottom of this downside move. Deep down we don't think that will be the case, instead taking another dip in late summer, early fall. The rebound from here, however, could be quite sharp and indeed tradable. With the damage to many stocks this past week there will need to be time to set back up. A rebound from here is likely to be an oversold short covering bounce and then that next pullback to set up the bottom. That lets stocks rally back, test, and thus ready to make a more sustained move higher from bases as opposed to rebounding from downtrends. We are looking to play that upside move, taking what the market gives.

Support and Resistance

NASDAQ: Closed at 2037.35
Resistance:
2045-47 from June and October 2005 lows and June 2004 highs
2050 from the summer 2005 lateral range lows.
2072 is the June closing low
2100 from the early and mid-2005 peaks
The 50 day EMA at 2166
2170 is the August 2004/April 2005 up trendline.
2177 is the December 2004 high.
2185 to 2182 is the September 2005 peak and interim high from November 2005.
2190 is the July 2006 high

Support:
2037 at the October 2005 closing low
2019 is the April 2005 interim high
2008 is the January 2005 low
1971 from an October 2005 peak and 1973 from a March 2005 low.

S&P 500: Closed at 1236.20
Resistance:
1249 is an old trendline from the August 2003/August 2004/October 2005 lows.
The 18 day EMA at 1257
The 200 day EMA at 1264
1272 to 1268 is the November and December 2005 closing highs and March 2006 closing low
1280 is the recent July peak.
The late January peak at 1285
The early June high at 1288
1297.57 is the recent February high.
1315 is the May and May 2001 peaks
1317, the recent intraday highs from April.
1324 to 1329 from the October 2000 lows.

Support:
1239 from the late June consolidation range.
1225 from the March 2005 high
1213 from December 2004 high to 1215
1205 from the August lows

Dow: Closed at 10,739.35
Resistance:
10,890 is the December 2005 closing high.
10,931 is the November 2005 high
The 200 day SMA at 10,934
10,965 from Q4 2000
The 18 day EMA at 11,025
11,044 is the January high.
The 50 day EMA at 11,084
11,097 to 11,137 is the last peak from the February top.
The 50 day SMA at 11,133
11,279 is the late May high
The March 2006 highs at 11,329 to 11,335
11,350 from the May 2001 peak
11,401 from the September 2000 peak and April 2001 highs

Support:
10, 737 to 10,730 from December and February lows
10,705 - 10,965 from July/August 2005 range top to bottom
10,678 to 10,665

Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.

July 17
New York Empire State Index, July (8:30): 21.8 expected, 29.0 prior
Capacity Utilization, June (9:15): 81.9% expected, 81.7% prior
Industrial production, June (9:15): 0.4% expected, -0.1% prior

July 18
PPI, June (8:30): 0.3% expected, 0.2% prior
Core PPI, June (8:30): 0.2% expected, 0.3% prior
Net foreign purchases, May: $46.7B prior

July 19
CPI, June (8:30): 0.2% expected, 0.4% prior
Core CPI, June (8:30): 0.2% expected, 0.3% prior
Housing starts, June (8:30): 1.915M expected, 1.957M prior
Building permits, June (8:30): 1.920M expected, 1.946M prior
Bernanke testimony to Congress
Crude oil inventories (10:30): -5.985M prior

July 20
Initial jobless claims (8:30): 332K prior
Leading Economic Indicators, Jun (10:00): 0.1% expected, -0.6% prior
Philly Fed, July (12:00): 12.5 expected, 13.1 prior
FOMC minutes, June 29 (2:00)

By: Jon Johnson, Editor

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

Technorati tags: stock trading stock market investing

Stocks hung over from strong Thursday move and ahead of long weekend.

SUMMARY:
- Stocks hung over from strong Thursday move and ahead of long weekend.
- Personal income and spending decent, PCE deflator 2.1%.
- Midwest manufacturing slows more than expected, still expanding.
- Gold continues to surge while bond yield curve re-inverts.
- Short week but a lot to prove: will Fed return to grouch mode?

Investors pause to consider FOMC statement and long holiday weekend.

Foreign markets were surging on the heels of the big Thursday gain in the US, but futures were mushy Friday morning until the personal spending and income data hit, showing the PCE did not jump higher as feared (0.2%, 2.1% year/year). That propped up the early trade and NASDAQ gapped higher on the open as stocks took the early offensive.

After SP500 tapped near resistance at the 50 day SMA, however, the market lost its bid. Unfortunately that happened in the first 10 minutes, and stocks were selling back down through the first hour. Losses never came close to getting out of hand, however, as the indices had those early gains to buffer the downside. They recovered after that initial selling and started a slow but steady climb back up, through midmorning, into lunch, and on to the last hour. That pushed the indices to positive, extending the Thursday move. As expected, however, the late trade ahead of the weekend was to the sell side, and stocks slipped to negative by the close, again sporting just modest losses.

Technically there was no damage done or advantage gained. SP500 closed at its lows but it was hardly a wild ride. Volume jumped early, died off, and then surged late as part of the Russell indices rebalancing. That pushed a lot of stocks sharply up and sharply down at the close as institutions shuffled their holdings to match the new balance. Breadth was close to 2:1 on NYSE, mediocre on NASDAQ. Some leaders moved higher, but there was no new surge upside. Basically some modest backfilling on volume that rose due to logistical issues as opposed to any new buying spree.

That left the Thursday move intact with the market looking to hold that gain over the next week and then push higher through next resistance. It always looks like a tall order after such a hard sell off, particularly when the Fed is still on the offensive and summer is just getting underway. The market does have some leadership returning from many different areas, however, and that is the ace in the hole for nearly all rebound efforts. After some testing of the move this coming week the market will try and resume building the recovery.

If it is successful we will see more stocks building their bases and making their moves. It is a bit difficult to look past the time of year and all of the issues facing the economy (Fed, gasoline prices set to jump higher once more, summer); we have had our doubts about the ability to make the move, indeed expecting another leg lower. We always teach, however, you have to go with what the market is telling you. Strong leadership coupled with solid price/volume action in the market in general is the best indicia of a healthy or improving market, and despite all of your detailed reasoning or gut feelings, the market has the last word. Sure the Thursday move could be a head fake, but you have to like the leadership that is out in front and the recovery of former leaders in energy, metals, etc.


THE ECONOMY

May PCE deflator checks in at 2.1%.

Personal income grew 0.4% versus the 0.2% expected while spending climbed 0.4%, right in line with expectations. The PCE deflator, one of the Fed's pet primary inflation gauges, rose 0.2%, in line with expectations. That kept the year over year rate of climb at 2.1%, flat with April. Personal income rose on interest income and partnership and business income. Wages and salaries were flat; another key Fed inflation watch point showed no gains. Two positives for a Fed on economic data watch.

Not bad, but the Fed cannot slip back into the bad habit of viewing economic activity, whether stronger or weaker, as necessarily leading to inflation. Inflation is monetary, i.e. depending upon the amount of liquidity in the economy relative to economic activity. If there is more money in the system than is being used to expand businesses, output, etc., then you have potential inflation issues as that excess money is used to bid up prices.

Thus just because economic data is weaker does not mean inflation chances are lower. You can have inflation and crappy economic activity as in the 1970's. The Fed has to keep its eye on the ball and look at economic activity in terms of its mandate: price stability and the maximum sustainable pace of growth. In other words, the economic activity should not be used as a measuring stick of inflation, but should be reviewed as part of overall Fed monetary policy to determine if it should try to encourage more growth while keeping inflation at bay.

Gold prices continue higher as the bond curve inverts yet again: time to kick the Fed again.

The Bernanke Fed reminded everyone of that dual mandate with its Thursday FOMC statement. To economic historians (or even those like me who just reads some history and applies the lessons) this was very refreshing: a Fed, at least on paper, that is able to segregate inflation indicators from economic growth rates.

To some in the gold and bond markets, however, it is a sign of a new Fed that does not understand the importance of keeping inflation at bay. Those were the ones going nuts when commodities shot through the roof earlier this year and helped drive bond yields higher as well before they too crashed with gold when the Fed started its tough talk.

Thursday and Friday gold was on a tear back to the upside, adding another $27 to $616. It was just down around $570 before the Fed meeting after the plunge from $730. Apparently the gold buyers feel the Fed is once again backtracking on its tough guy inflation policy. Gold is an inflation indicator, a traditional hedge against rising inflation. When gold rises money is moving into it to avoid losing value. This is no demand move due to the Chinese and Indians wearing more gold bracelets; it is related directly to the Fed statement as it turned on a dime with the announcement.

On the flip side, the bond curve started losing ground once more. Thursday the curve returned to the more typical shape with the short end below the long end. It was still flat, but the curve was pointing in the right direction. Friday that changed again with the short end rising back above the 10 year yield (5.15% 2 year versus 5.14% on the 10 year). Moreover, yields are dropping once more with both below the Fed Funds rate (now 5.25% after Thursday). The inversion is modest, hardly indicating a recession, but a flat curve is not a good sign for economic growth. Yields below the Fed Funds rate are not a good sign for economic growth as well.

Yields below the Fed Funds rate and a flat to inverted curve are not good signs for the economic future. On the other hand, jumping gold is a sign of inflation. You want to be careful and not mix the two. A slower economy does not mean automatically lower inflation. Thus gold can rise while the bond curve flattens and falls below the Fed Funds rate and you could have inflation and a slowing economy as well. The Fed has to figure out how it can control inflation and keep economic growth at its sustainable maximum.

The Fed doesn't have to jack rates up to pre-empt inflation; it can sell Treasuries, pulling in money and retiring it from the system for now. It is not doing much of that, instead relying on interest rate increases. Thus far liquidity is still too high even as the bond market fears the Fed is going to go too far with rate hikes, chasing inflation but not stopping it. That is why yields are falling and the curve is flat to inverted. The Fed recognizes its mandate, but it cannot get caught in the old habit of comparing inflation and economic growth. Again, inflation is a monetary phenomena and it can occur in strong or weak economies. The bond market is simply afraid the Fed is going to do what it always does, i.e. try to put out an inflation fire by burning down the economy.

Just an over-adjustment?

There was a lot of movement at the end of the week with the FOMC result fostering bets beforehand (speculation of 50BP, etc.) and then unwinding positions afterward. It is going to take next week to hit the mean after the gyrations back and forth both ahead of the FOMC meeting and after.

Chicago PMI fades as prices rise.

Expectations were for 59.0, down from 61.5 in May. Reality was 56.5; still expanding but slowing significantly. Employment was down (50.4 from 52.8). New orders plunged (57.2 from 69.6). Prices surged (89.0 from 76.9). Down in the wrong places and up in the wrong places. Still expanding but at a slower pace (that bond market fear) while prices are jumping (that gold market fear). Again, the Fed has to address what is the root of the problem: tamp down liquidity a bit more to get inflation in control but don't jack rates so high and get too aggressive with money supply to kill off an aging expansion. See? No problem.


THE MARKET

MARKET SENTIMENT

The sentiment indicators have faded, at least volatility. They have shown strong levels that could turn the market. After the huge Thursday surge that will have to do. Volatility was lower than we wanted though it did hit a post 2003 high this month. Bulls and bears kissed. The put/call ratio camped out over 1.0 for almost a month. Again, the work has been done unless this is really going to be a much nastier sell off requiring volatility up in the forties as it was in late 2002.

VIX: 13.08; +0.05
VXN: 17.89; -0.04
VXO: 12.44; +0.16

Put/Call Ratio (CBOE): 0.96; +0.28

Bulls versus Bears:

Bears rose but so did bulls, and after kissing last week that just kept them from a crossover move that historically is a very strong indication of sentiment being really ripe for a move. With the strong price/volume and leadership move it looks as if the sentiment did its job.

Bulls: 37.4%, back up from 35.6% last week. That stalls somewhat the sharp decline the prior week (down from 38.7%), but still at a low level after a high at 53.2% at the April peak. It surpassed the 42.3% hit on the last low. The current level puts it below the May and October 2005 readings that saw new upside runs.

Bears: 36.3%, up from 35.6%, but not enough to crossover the bulls, typically a surefire indication that the market is ready to rumble. Still chasing the bulls and would have caught them but for the Thursday rally. Nice climb to a new post-2002 high as it eclipses the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).

NASDAQ

Stats: -2.29 points (-0.11%) to close at 2172.09
Volume: 2.936B (+30.07%). Volume surged as NASDAQ gapped higher but could not hold the move. Lots of quarter end volume and rebalancing of the Russell indices. Thus we cannot make too much of this high volume close to the week and the month.

Up Volume: 1.466B (-569M)
Down Volume: 1.381B (+1.187B)

A/D and Hi/Lo: Advancers led 1.48 to 1. Positive on a down session, stronger than the index itself. And, of course, NASDAQ breadth was huge Thursday on the follow through.
Previous Session: Advancers led 3.92 to 1

New Highs: 132 (+31)
New Lows: 58 (-15)

The Chart: http://www.investmenthouse.com/cd/^ixic.html

Gapped higher but that did not last. Moved over the December 2004 high (2177) but couldn't hold the move. Very half-hearted effort, but given the huge Thursday move the action was typical, i.e. just sluggish. NASDAQ remained above the 2004/2005 up trendline (2161), and we are looking for NASDAQ to hold this level this coming week if this move means much. Lots of near resistance at that December 2004 high and the 50 day EMA (2189). A test of the trendline sets up a run at that next level as NASDAQ tries to work its way out of a hole.

SOX (-1%) was the weakest again, but the loss was modest, holding onto most of the Thursday surge. It could not, once again, break through the 18 day EMA (447.76), the resistance in this downtrend. That is what has to change if this index is going to add to the follow through move by the other indices. Has set up the bottoms for a double bottom, so it can deliver. Of course the US postal service can deliver as well. It just takes time and sometimes the package gets lost.

SP500/NYSE

Stats: -2.67 points (-0.21%) to close at 1270.2
NYSE Volume: 1.914B (+1.47%). Strong trade once more, holding above average as the NYSE indices spun their wheels. You can call it churning (high volume turnover after a move higher), but with the Russell rebalance it was related to getting index funds adjusted to the new weightings.

A/D and Hi/Lo: Advancers led 2.21 to 1. Very positive breadth given the close in SP500; the small and mid-caps were advancing quite well as energy and metals recovered and the Russell adjusting.
Previous Session: Advancers led 5.46 to 1

New Highs: 119 (+26).
New Lows: 80 (-45)

The Chart: http://investmenthouse.com/cd/^gspc.html

Rallied up to the 50 day SMA (1276) early and then sold off. An afternoon rebound moved right back up to that point but then gave way once more as the last hour swoon took over. SP500 closed at the session low but with very modest losses. We could see some backing and filling with the 50 day EMA (1267) or the 200 day SMA (1262) before making another run at the next resistance.

SP600 (+0.78%) continued higher Friday, moving through the 50 day EMA (373). Good follow up action to the Thursday break higher, helped by the rebalancing in the Russell indices. Heavy resistance at 380 to 382 with the 50 day SMA (378) just above that level. A move up to that next resistance and then some testing sets up the next move higher.

DJ30

The blue chips rallied through the 50 day SMA (11,187) but could not hold the move, fading with the rest of the market and closing below that resistance point. Volume was up as well, still above average. Some testing back to price support at 11,000 and the 50 day EMA (11,101) sets up the next break higher to take on some important resistance from 11,200 to 11,317 (March closing high). Nice test and blast off of the 200 day SMA, and a test of the 50 day EMA holding most of those gains sets up the next blast higher.

Stats: -40.58 points (-0.36%) to close at 11150.22
Volume: 365M shares Friday versus 337M shares Thursday. Stronger and continued above average volume as DJ30 reversed at resistance. Typically not a good sign, but with the follow through Thursday in the indices we are not viewing this as a reversal.

The chart: http://www.investmenthouse.com/cd/^dji.html

MONDAY and a short week.

Monday the market will close at 1:00ET ahead of the Fourth of July holiday. Thus it is not going to give us any indication of where the real strength lies for the week. Thursday was a strong session but there were undercurrents to end the week with the Russell indices and shuffling a lot of positions made on bets regarding the Fed. Thus we don't expect any real clarity until later in the week after the holiday and more of the market gets back into the game.

Of course it will be the heart of summer and that means more summer trade. The Fed is in the bag and now earnings is the key. We are seeing some warnings, some earnings surprises going both ways, and we are going to see a lot more this week and next, then the earnings flood. Thus far the warnings have been rather quiet but the technology earnings already out and the warnings are not positive with respect to the future. That will be huge for the market, and it is something the Fed needs to be aware of as well. It is not catering to the market by recognizing that earnings expectations are falling. That is a solid leading indicator of the economy's path.

Along with earnings is a heavy economic agenda. Construction, ISM, factory orders, the jobs report. After the FOMC meeting the market will get a lot of economic data to chew on as well as anticipation of earnings. As my wife says, it will make it or break it, meaning it will bring things to a head. The market has something going for it with the follow through and leaders re-emerging.

On the flip side, the so-called bond vigilantes and gold bugs will be screaming about a once more soft on inflation Fed. The bond market is anticipating that somewhat with this fall in yields and slight inversion once more after the FOMC statement. In other words, the bond market anticipates the Fed will be bullied again and thus we may see the return of the grouchy Fed as it again tries to reassert itself as a bad hombre with respect to kicking inflation's butt. If it does, once more the market will get antsy.

What we need to do is stick to the nuts and bolts, watching price/volume action and leadership. We don't want to forget the bond market, and with SOX back up at the 18 day EMA resistance again, it is worth watching as well.

Leadership. We noted it was stirring over a week back just as the market looked ready to head lower. We expected another leg lower, but the leaders did not sell off and the market checked up. It then delivered a follow through Thursday on strong volume. Leaders are now emerging from many areas. Even with our doubts we did not ignore strong stocks moving higher. We have thus been accumulating positions in strong stocks since, and we are going to continue doing so. A market test of that big Thursday move that holds support will set up some leaders for a further move. We look to take advantage of that.

Support and Resistance

NASDAQ: Closed at 2172.09
Resistance:
2177 is the December 2004 high.
2185 to 2182 is the September 2005 peak and interim high from November 2005.
The 50 day EMA at 2189
2205 is the December 2005 closing low
2218 is the August 2005 peak before the sell off through October 2005.
The 200 day SMA at 2228
2234 is the early June high
2240 is closing low in February range.

Support:
2162 to 2155 from December 2005 and September 2006
2160 is the August 2004/April 2005 up trendline.
The 18 day EMA at 2141
2100 from the early and mid-2005 peaks
2063 is modest, soft support
2050 from the summer 2005 lateral range lows.
2045-47 from June and October 2005 lows and June 2004 highs

S&P 500: Closed at 1270.20
Resistance:
1272 to 1268 is the November and December 2005 closing highs and March 2006 closing low
The 50 day SMA at 1276
The late January peak at 1285
The early June high at 1288
1297.57 is the recent February high.
1315 is the May and May 2001 peaks
1317, the recent intraday highs from April.
1324 to 1329 from the October 2000 lows.

Support:
The 50 day EMA at 1267
The 200 day EMA at 1262
The 18 day EMA at 1254
1245 is an old trendline from the August 2003/August 2004/October 2005 lows.
1225 from the March 2005 high
1213 from December 2004 high to 1215
1205 from the August lows

Dow: Closed at 11,150.22
Resistance:
The 50 day SMA at 11,188
11,279 is the late May high
The March 2006 highs at 11,329 to 11,335
11,350 from the May 2001 peak
11,401 from the September 2000 peak and April 2001 highs

Support:
The 50 day EMA at 11,101
11,097 to 11,137 is the last peak from the February top.
11,044 is the January high.
10,965 from Q4 2000
10,931 is the November 2005 high
The 200 day SMA at 10,908
10,890 is the December 2005 closing high.
10, 737 to 10,730 from December and February lows
10,705 - 10,965 from July/August 2005 range top to bottom
10,678 to 10,665

Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.

July 3
ISM Index, June (10:00): 55.0 expected, 54.4 prior
Construction spending, May (10:00): 0.2% expected, -0.1% prior

July 5
Factory Orders, May (10:00): 0.0% expected, -1.8% prior

July 6
Initial Jobless Claims (8:30): 313K prior
ISM Services, June (10:00): 59.0 expected, 60.1 prior

July 7
Non-farm payrolls, June (8:30): 168K expected, 75K prior
Unemployment rate, June (8:30): 4.6% expected, 4.6% prior
Hourly earnings, June (8:30): 0.3% expected, 0.1% prior
Average workweek, June (8:30): 33.8 expected, 33.8 prior

By: Jon Johnson, Editor

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

Technorati tags: stock trading stock market investing