Monday, September 07, 2009

Indices Knocking on Door of Recovery

- Jobs are not great, but market continues the rebound nonetheless.
- Some short covering yes, but some strong moves also.
- Indices rebound, knocking on the door of recovery.
- Another round of early week selling. Coincidence or something brewing?
- Revisions, hours worked show recovery is just not strong enough yet to produce jobs.
- Market still in its overall uptrend but still having near term issues.

Market rallies in the face of jobs report, 3-day weekend.

Friday was about two things: jobs and a three-day Labor Day weekend. Jobs were important; every month people look to see if the economy is improving, and there has been some improvement over the past week with some regional manufacturing reports and the national manufacturing report. The ISM did not make 50, but there has been an improvement, and people always start looking for jobs to improve. We are just at the beginning of a recovery, thus jobs are not going to be there until the personal departments think it is safe to bring people on again. The other factors involved in the numbers are not there right now. We all have the long three-day weekend, and what often happens ahead of that is that the shorts have to worry about that "X factor" that might lead to the stock market rallying. They do not want to be in a lot of short positions, so they reduce their exposure, they cover, and that can cause stocks to rise. We may have gotten some of that on Friday.

The market stumbled earlier in the week and was able to make a comeback later, as we saw three weeks ago. It did not make it positive on the week, but there were good recoveries by the indices that put them at or right above the early August highs. That is a key point to note; indeed, SP500 moved over the November 2008 peak so there was some progress made at the end of the week after a pretty weak start.

On Friday, there was news out ahead of the jobs report in the US. China was up and was once again the early morning topic. We saw commodities and industrials and those related to growth around the world moving higher and, as with steel, they held up quite well during the entire session. Indeed, a lot of stocks were up by the end of the day, but it just took a while to get there. Canada was out with its jobs report, and it showed its first gain in 4 months. It would be nice if we could say the same, but unfortunately we have to turn the calendar back over a year to get there. We have a lot of catching up to do. Maybe we can look at it as a "glass half full" scenario while Europe, Canada and other countries are already pulling out of the recession. We are trying and are not there yet, but catching up can be fun, right?

Friday the futures were up on that news and the jobs report came out. Though it was better than expected, there were problems with the report such as the unemployment rate spiking up to 9.7% and investors kind of reading between the lines causing futures to fall back to flat ahead of the bell. Then as the market opened, stocks rallied. The futures showed what the morning would be like: up and down, back and forth. Midday stocks then caught a bid and took off. They went straight up at lunch, pushing everything positive, and then managed to trend higher throughout the afternoon. There were not great gains after that, but they trended higher and closed with very solid gains - 1.8% on NASDAQ, 1.3% on SP500, SOX closed up 2.68%, and the small caps up 1.2%. It was a strong day when the closing bell rang, so not a whole lot to complain about. Every time the market tends to look like it will sell off, the liquidity comes in and helps push things back up. Friday we had an extra impetus, and that was the long weekend. Often with a long weekend, the shorts want to lighten up their position and start to close, and when they close they have to buy back shares. What can happen is that that can snowball, and as stocks move up to resistance or pop resistance they start buying more because they are moving above resistance. It is a self-fulfilling prophesy. Today stocks surged midday and melted higher for the rest of the session to close at those nice gains.

Was it all short covering? The breadth was very strong. There was short covering, there is no doubt, but look at the mix of stocks that were moving up, which were at 4:1 on the NYSE, and these were not the heavily shorted stocks. These were great stocks in great patterns and stocks in great patterns are not heavily shorted. It is the ones that have done the nosedive that the shorts have been selling and pushing lower; those are the ones that rebound on a short squeeze. Everything was up, and some of those stocks were bouncing as well so there was some covering, but there was real buying going on. You cannot turn your back on good stocks in great patterns that are making solid moves, so we were out there buying stocks as well. We will see what happens next week when the market opens. Even though the indices were up, they did not necessarily make breakouts, and they did not necessarily reverse what happened early in the week when they moved sharply. There is that liquidity out there, and one thing that we have seen in the market is that liquidity is winning out so far.



On SP500, we see that the NYSE volume was below average, and that was the first time it was below average in six sessions. Even though we had a solid 1.3% point move, the volume was not really backing the move, and you can say the same thing with respect to the NASDAQ.

NASDAQ put in its third straight day of declining, below-average volume. Those coincide with the cessation of the selling on Tuesday and the rebound Wednesday to Friday. There is a lower and lower volume push to the upside after some high volume selling. What that often means is that you have fewer buyers on the upside then there were on the downside, and that makes any upside move suspect. Friday there was something else at play. We have a three-day weekend ahead of Labor Day, and a lot of the money managers and hedge fund managers were gone after the noon hour. You naturally would get lower volume, and on top of that it is a summertime volume. You are going to have trade decline, and that makes any read of volume somewhat suspect. It is hard to label this just a relief rally bounce and we cannot put faith in it. Take it with a grain of salt.

There is a mitigating factor when you look at breadth. Once again, both exchanges put in strong breadth sessions. The NYSE saw 4:1 breadth on top of a 3:1 session on Thursday. NASDAQ put in a 2.9:1 day, and that was on top of a 2:1 breadth day on Thursday. When there is short covering, you typically see much narrower breadth. The reason is that the shorts focus on a few key stocks and drive them lower, and that often takes the indices lower because they are big name stocks. Then when they cover up, they have to buy those back, so you have narrow breadth as the shorts cover the stocks that they have sold short. What we have here is very broad buying and a broad recovery. When you look at the quality of the patterns and the quality of these stocks that are in those patterns, you see they are not the fodder for the short sellers. These are high quality stocks that no one is selling. They are indeed under accumulation based upon their bases. It is hard to say that this was just a short covering rally that sent stocks higher when there were good stocks that moved up on good volume. From an internal perspective, you cannot call this a short covering rally, but you can say there was widespread buying in many quality stocks.


On Thursday I was talking about whether or not the indices could clear some key levels, and there was the possibility that this selloff right here in August could turn into some kind of right shoulder to a short head-and-shoulders pattern. They are not out of the woods yet. SP500 did an important thing by breaking back over that November peak, and that was the first peak for SP500 after it sold off in the fall of 2009. That is a very important level because that represents the last area that buyers really stepped in and bought the market thinking it would bounce right back. They were disillusioned, so when the market came back up they would sell to get out, as they say, "even."

We are now back at that point, and on Friday SP500 was able to recapture it. There were those factors about volume that may mitigate the move somewhat, but overall it is hard to complain. That intraday high in early August did not quite make over 1,018, but that is all right. It closed at 1016.40, so it is pretty close, but it is still at a point where it could roll back over if the buyers do not continue to come back in. It is a key level. Friday it was good to see that liquidity driving things back up and maybe some short covering ahead of the weekend, but it was not the answer in and of itself, and it did not explode the market to a new high. The NASDAQ bounced off of its October 2008 gapdown point, so we can see right here by this top line that that is where it gapped down. It has broken through it at July, tested at mid-August, and came right back up after breaking it. This past week it came right back down and sat on that level and bounced off of it. There is no great shakes of volume as it bounced off, so it is also not out of the woods. It did surpass its early August high at 2,016 as it closed at almost 2,019 on the session.

It did break through that, which is important, but we always have to talk about support and resistance as ranges versus specific points. You can get too wrapped up in looking at one point and saying that if it breaks at that point then it is obviously going to go higher. That was not the case, was it? It did break that point but it came right back down, and there is nothing unusual about that. An index will come up and bump up against resistance point a couple of times and then it can break through after that. People think it is always double topping and perhaps it is, but you have to look at all of the factors involved: look at the price-volume action, whether there is accumulation ongoing, whether there is leadership and what kind of bases they have, and whether they are moving well. That will tell more of the picture than just one snapshot of one day in the stock market.


We see NASDAQ put in a credible day. It is hard to argue with a 1.8% move, especially when it came back off of a pretty nasty gut punch on Monday and Tuesday as we saw on a prior Monday and Tuesday to start in mid August where the market got sold off but bounced back again. I want to make a point about that. We have this selloff here with the gap down, but the market came right back (I am talking about NASDAQ, but also all of the indices). Then it had a breakout attempt and then another failure, another tough Monday and Tuesday. Does that mean anything in and of itself? You can flip a coin 100 times and if it comes out heads all 100 times, the odds are still 50/50 next time on whether it is heads or tails. In this case, does it mean anything if we have two Mondays that break down? This is not just a random selection as in a coin flip; the market is a compilation of all of the emotions of investors around the world. We see two gapdowns earlier in the week - we have recovery thanks to the liquidity, but this is something that we have not been experiencing, and when you see something like this you have to take note of that. It becomes a pattern. We are big into trends and big into support and resistance. If the trend comes where the market cannot make headway because every time it reaches a certain point, the sellers gap it down, then that is key. You need to pay attention to that, and that makes next week very interesting. It seems like I said that about this week as well, but what we have now is that the market did in fact sell off of high volume, it managed to rebound, but it was at low trade. We will have to see whether September starts living up to its billing again and starts taking the market lower when everyone comes back from vacation after Labor Day.

The SOX is very interesting to look at. It was struggling, but it made that gap higher just over a week ago that broke it out to a new post-March high. It immediately gave it up, but it immediately made a higher low and came back and broke out again. Suddenly, the semiconductors look much stronger than they did just a few weeks ago. Indeed, tech stocks look much stronger than they did just a few weeks ago and even earlier this week when they looked tired.

The NASDAQ 100 is the largest stocks on NASDAQ, and it is mostly dominated by techs. If you look they have put in once again a test of the 50 day EMA and bounced, albeit volume was not great. They did bounce however, and now they are right in this range of resistance. It is a key test because there is declining volume, high volume selloff here, somewhat high volume here on this selloff. Here, MACD matched prior highs in the July-August peak, but at the end of August when NASDAQ 100 matched and topped the prior August peak, MACD was lower. There is a loss of momentum here, and we will see if the large cap techs can turn it around and pick up the momentum and keep this late surge going at the end of the week.

We have to realize that the sellers are out there and are taking their shots at stocks and trying to sell them off. After all, it is September and the market has had a 15% run in July, and that is on top of the huge March-early June run which put the indices up 50%. After that kind of move, you can bet there is going to be some sellers out there. We see them and they are trying to sell some stocks.

We still see that in some of the big name tech stocks such as QCOM. QCOM double topped somewhat but recovered, moved up to a new post-March high but then had some of the same issues with a double top here. As it made this higher high MACD was lower in July than it was at the June peaks, and then as it came back up and matched that high in late July, MACD was lower. There are momentum issues here with QCOM. We are looking at QCOM to the downside and have picked up some positions. We may get egg in our face on this, but we have some serious resistance here on top of a double top, a break of the 50 day EMA, and a more substantial break than it has shown in the past and declining MACD. This is in a good risk/reward position for us to try a downside play and that is what we are doing.

Not all of the large cap techs enjoyed the kind of move that we saw on Friday. QCOM was up, but it did not put it in a great position. There were other stocks that did quite well in the tech sector. One that we bought into on Thursday was RIMM. It had formed a nice triangle and we picked it up on Thursday when it bounced off of the 50day EMA, and it put in another nice day that broke through this June-August down trendline. RIMM is showing a bullish pattern and is acting bullishly, and that is a positive for NASDAQ overall when the stocks in the index act as their patterns suggest they should act. You cannot talk about techs without talking about AAPL, and AAPL looked like it could have sold back to 160. There is a shelf of support there where it gapped up, tested that in mid-August, but then it found support at this higher shelf and bounced on Friday on rising volume. The buyers were back in AAPL on Friday. It is hard to discount that, and it is hard to discount some of these key techs moving higher, but it is not 100% across the board with the large cap techs.

Other areas moved up as well, and one of the interesting ones that we saw that has been in serious trouble of late (but is now recovering) are the Chinese stocks. BIDU came down again to the 50 day EMA and undercut it, but how many times do you see a stock undercut a key level onto reverse and continue higher? Look at the volume on the upside on Friday which was a weak-volume session in the market overall. That is a nice little double volume at the 50, and powering higher on good volume. We have a triangle pattern with SOHU. You can see the triangle, the higher lows and then the lower highs - there is not a lot of volume, but it is making higher lows and it gapped up through the 50 day EMA today. If we get a test back in this range to start next week and it holds, we are looking to be buyers at that point. The point is that Chinese stocks are suddenly coming back to life. NTES survived some ugly trade in mid-August, but it also held the 50 day EMA and a trendline that has been running up there, making something of its own double bottom at a key range of support. Look at the June peaks and then in July and August; it held key support.

The point is that some of the key areas that have been in trouble such as large cap techs and techs in general, semiconductors and Chinese stocks are all of a sudden back in good patterns and moving higher. Bullish stocks in bullish patterns acting bullishly - that is a positive for the market overall. I hate to imbue too much strength into this, but then again, you have to go with what the market is showing you. Again, we can look at some of the stocks that we talked about on Thursday such as the steel stocks, and as China does well they do well. We can see RS continued its break of its downtrend out of its triangle, and it is doing so on better volume. It is hard to complain with these kinds of moves. I also want to talk about energy. We have a service company, WFT with a real nice cup with handle. It held the 50 day EMA and is starting to bounce up on rising volume. In the offshore drillers there is a triangle. There is a break higher over a key level, and we will see if it can hold, but it is a very promising move. We have another oil service company, HAL; it is a company people love to hate, but it is kind of hard to hate the move. The pattern is a bit messy, but you can see there is a range of resistance and it is making a breakthrough and pulling some stronger volume as it does.

I am not going to end this without talking about gold. We had a great week in the yellow stuff. It broke over the June peak, and it is approaching the February peak and also way back at the July 2008 level. We are right in that range, and that makes it interesting. We have gold closing right at the summer high a year ago. The question is whether it going to turn tail and fall again at $98-100, or is it going to make the breakout? I think it is going to make the breakout this time, and we are going to take some gain. It is going to come back and test and hold the breakout and move higher. We will not have any problem with that.

We have talked about the indices and some leadership stocks. The key point is that while the indices are still not out of the woods buy any means, they could still - I hate to say it because I hate to talk about head-and-shoulders patterns - but they could still definitely form a little head and shoulders action. They showed positive action in the week led by individual key leaders that were showing positive action as well. When you have that, you cannot ignore these kinds of moves to the upside. Look at the SP600 and we see that it is nowhere near poking through its August high - that is something we are going to watch. If it stalls out, we can play another IWM to the downside next week if it is set up to do so and the market in general stalls out. You have to watch the small caps as well because when you see 4:1 breadth on the NYSE, you know the small caps are moving higher because most of the stocks are small stocks. If they run out of gas, then there could be trouble, so again, the market is not there yet. It put in a good recovery to end the week, and it has great stocks leading it, but it has not answered the question 100% whether or not it is going to make a new break higher. We will see when supposedly everyone gets back to work next week and the volume starts to pick up whether the sellers are going to come in and treat us to the downside September that, historically, it likes to show us.


As for the close on Friday, gold managed to close basically flat at $996, down $1.60, but that was quite a recovery because it was down 5-6 points intraday and made an amazing rebound into the close. The GLD ETF that we are playing managed to turn in a positive session, so we can see that the gist was that gold has a lot of buyers. It sold off and it was a down day for gold, yet it managed to rally back.

Did dollar was a bit weaker, closing at 1.4304 Euros, down from 1.4254 on Thursday. Even with a weaker dollar, oil was down. It closed at $67.79, down $0.17. That tells us that oil once again rallied up to that $72-$74 range and found a resistance that bounced it down. There is no issue with that. Oil is trading in a range because it is trying to find out whether China is for real or not and whether the rest of the world recovery is for real. That is one of the reasons that gold is going up because it is not sure whether it is real. There are Chinese buying gold and there is a worry about inflation because the ECB said yesterday and Wednesday that it is not going to go out and get rid of its monetary stimulus. It says it just might be too soon to be doing that, so the gold buyers are concerned that if Jean-Claude Trichet, basically the inflation hawk of the world, decides that there is going to have to be more monetary stimulus for longer than anticipated, then people are worried about inflation. They are buying gold and there is real money behind this move. We anticipate a good showing.

Bonds rallied some and that pushed yield down. The 10 year closed at 3.44%, versus 3.34% the day before. A little bit of flux in the market, but not much. They held their patterns despite the equity market moves and despite what we heard with the rest of the economy.

Speaking of the rest of the economy, the big story on the day was the jobs report. 216K jobs were lost in August compared to the 276K lost in June. That was expected to pull down 230K, so it was a bit better than that, but the unemployment rate jumped up to 9.7% and that is the highest since June of 1983. That is when we were coming out of that really ugly recession to start the 1980's - we were coming out of it gangbusters, but look how unemployment still lagged. At that time, the economy was taking off with in a massive run higher, yet employment was still lagging. Are we foolish to look for a major turnaround in employment? Yes. The economy is simply not strong enough to support that, and that is the boogeyman out there. That is what is concerning many very smart economists. If we do not have the kind of economy that will roar ahead and start creating the 250-400K jobs a month that we need, and then we could be in this for a long time, just like in the 1970's. Gee, where have you heard that before?

The 1970's was the decade of malaise as for as the economy was concerned because we had the wrong policies in place that did not send the economy surging higher and did not create a lot of new jobs. We had long-term, chronically unemployed people, and when that happens you have moral down because they are not spending - because there is no money to spend. Then the rest of us have to pay unemployment costs for them in order to help them get through this time. It is a pipe dream if you do not think we all pay for the unemployment of others because we pay through it through what the companies charge us for their goods and services. We all have to underwrite that, and no one wants to do that. That is unproductive. We have to create jobs and the real worry is that we are going to have this same kind of problem.

One of the reasons that the unemployment rate went up to 9.7% was because when people see economic improvement, like the better ISM report, the housing market looking better, they get excited and start looking for a job. Then they get in and find out they cannot find a job so they are back in the job pool, they cannot get a job, and the unemployment rate spikes up. We have a 9.7% reading versus the 9.5% expected and 9.4% in July. That was a disappointment. Are we on the way to 10%? We could be. When you add in what is called the disgruntled workers - those are the people who came in, cannot find work, and gave up and left the pool - the rate is 16.8%. That is unbelievable. There are officially 26M Americans without work. If you add in the 16.8% then you are getting close to doubling that level. That is a frightening number of people out of work. This is happening all across the country, and that makes it very difficult to get out of these economic malaise situations unless you can have strong job creation. Unfortunately, we do not have any kind of John F. Kennedy program going on now that will really rev up the economy as we did in the early 1960's.

We set some records. We lost 63K in factory jobs, 136K in goods production, and 65K in construction. What do you expect? The economy is in a recession and this is a normal type of number for a normal type of recession. These are recession numbers, but they are not Great Depression numbers that we were throwing off in the fall of 2008. We are not there by any stretch of the imagination, and I applaud Vice President Biden for acknowledging that. That is about the only thing I would applaud him for, but he acknowledged that. You have to dig a bit deeper. Average hourly wages rose 0.3% as expected, and matched the prior 0.3% in July. That was also up 2.6% year-over-year. That is a positive because at least they are getting a bit more pay, but it is not that much of a raise, so will not have that much of an impact now because fewer people are working. They would have to really raise the wages of those that are left working in order to make a significant impact and take care of all of those who are not working and offset the difference. Also you have to figure that most of this increase in average hourly work that we are seeing is because of the mandatory hike in the minimum wage. These are illusory gains. These are not people who are getting well-deserved wages, this is something the government is cramming down small business's throats and saying they have to pay them. It is not because the economy is any more productive, it is not because people are buying more goods, and it is not because the companies have extra money to pay their workers. It is because it is mandated by the government. That is inflationary, and there are going to be jobs lost when we need to have jobs gained. That is what always happens when the minimum wage is raised. There is my little soapbox action, but I try to back everything up. These are the facts and what history shows.

The key element of any jobs report is the average hours worked per week. What we see is, after a gain in July, it was flat at 33.1 in August. That was expected, but it is bad when your expectations are for no growth. As I said before, we have to get more jobs created and one of the things that create jobs is when the economy started going and companies need more help. They work their workers as much as they can until there is about to be a mutiny, and then they bring more people on. Whenever that happens, we see the average hours works per week rise (and we see it rise more than 33.1 hours). We are not even close to the 40 hour weeks with a massively reduced work force. We have fewer hours worked with less people employed, and that shows there is not the drive to go out and hire new workers because there are no jobs to be filled. The people who are there are not pushed to the max like they would be if the economy was surging back up and they had orders to fill and more manufacturing to do; they would have to have more people to do it all. That is a key element that shows what we already knew: We are not there in the jobs picture yet, and it is kind of a pipe dream to think that we would be. I have said "pipe dream" a lot lately, but it has been a surreal time, has it not? We are seeing things happen on the federal level that we have never seen before, so it is kind of like a pipe dream, but you want to wake up some day have it all be over. Unfortunately, it is reality.



VIX: 25.26; -1.84
VXN: 25.85; -2.25
VXO: 24.24; -1.9

Put/Call Ratio (CBOE): 0.89; -0.03

Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.

Bulls: 50.6%. Bumping at highs for this rally off the March lows but off last week's peak that was the high for the rally. The move higher is slowing its pace, flattening out the past three weeks but is well over the 35% level that is the threshold for what is considered a bullish climate. It does not mean things are necessarily bearish; that takes a reading in the 60% range. Hit a high of 47.7% mid-June on the run from the March lows. Again, to be seriously bearish it needs to get up to the 60% to 65% level. Dramatic rise from 21.3% in November 2008, the bottom on this leg. This last leg down showed us the largest single week drop we have ever seen, falling from 33.7% to 25.3%. Hit 40.7% on the high during the rally off the July 2008 lows. 30.9% was the March low. In March the indicator did its job with the dive below 35% and the crossover with the bears. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator.

Bears: 24.1%. Bouncing as some skepticism creeps into the market as the rally falters some with a couple of sharp selloffs in the past three weeks. Hit a low of 21.3% three weeks back on the market rally. Rebounding some from the big drop 31.1% and 35.6%. For reference, cracking above the 35% threshold considered bullish. Hit a high on this run at 47.2%. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


Stats: +35.58 points (+1.79%) to close at 2018.78
Volume: 1.677B (-6.23%). Friday was light as you would expect, but all the rebound days to end the week were on weaker and weaker volume. Not a lot of buyers overall on NASDAQ, but there are some solid leaders that are moving well. The question is whether they ignite overall buying when everyone gets back to work after Labor Day.

Up Volume: 1.461B (+110.377M)
Down Volume: 239.425M (-289.19M)

A/D and Hi/Lo: Advancers led 2.9 to 1
Previous Session: Advancers led 2.07 to 1

New Highs: 33 (+16)
New Lows: 9 (+2)





Stats: +13.16 points (+1.31%) to close at 1016.4
NYSE Volume: 1.155B (-9.72%)

Up Volume: 999.354M (-59.943M)
Down Volume: 136.769M (-68.927M)

A/D and Hi/Lo: Advancers led 4.12 to 1
Previous Session: Advancers led 3.01 to 1

New Highs: 112 (+12)
New Lows: 28 (-11)




Stats: +96.66 points (+1.03%) to close at 9441.27
Volume DJ30: 152M shares Friday versus 168M shares Thursday. Declining volume each day of the rebound.



The market is closed on Monday because of Labor Day, so we have this three-day weekend. There has not been a lot of change has there? The market gaps down early in the week and then it comes up. We were playing some of those gaps down - a potential for a gap down - we bought some DIA SPY and also bought some QCOM to go along with some of our other positions, but the downside plays have bounced back on us. Some of them are still in great shape, but the SPY and the SMH bounced back up. We can still play them to the downside if this thing rolls over again, but the market did not finish the week with a trend, did it? It sort of did - it finished the trend with the overall uptrend, but it has not hammered out the near term trend. We have had two down, sharply lower Monday and Tuesday early-week selloffs in the last three weeks. That is sharp downside. The sellers are moving in and trying to break something, but they cannot hold it through the end of the week. Maybe this was a short-covering rally ahead of a three-day weekend. We will see if the market turns over and starts to sell again on Tuesday when (in theory) everyone gets back to work and you have the full volume up. Then whatever trends are in place can be accentuated or it can be reversed when the new money comes in. We have come in after Labor Days and been just slaughtered. This is not the same situation fortunately, so we will have to see. It may not be a totally heavy, sharp selloff. If we do get more of a pullback, I still think it will be one that holds near the June peaks. That is a very solid support level and there is a lot of liquidity out there. There is no reason for the market to turn over other than it has run a long way. Look at history, though; markets can run a long way, take a short rest, and then run an awful long way further.

We will continue doing what we have been doing. We have hedge a bit to the downside with a few downside plays. I think we are going to make some money on some of these - quite a few of them, as a matter of fact. I still think we will get another jerk lower because the sellers are going to take another shot because we are in September when they get back from the holiday. We will continue to look at some downside plays and positions, and we are warranted to move into some of these positions. As I said, you cannot deny the strong upside that we are seeing in quality stocks. We were buying quality such as HAL and RIMM - there are quality stocks moving higher from good positions and you cannot deny those moves, especially when there is all the liquidity out there that we have been promised will remain by Ben Bernanke and Mr. Trichet. We are going to watch for gold the breakout over 100, and that would put the GLD over 100, then we will see what kind of test we will get on gold. If it holds, we will move in. That may take a week or so, so we have time to get that in shape. We are going to continue to look for those solid patterns and good buy points in those patterns. That has the key right now. The market is showing a bit of toppy action and is a bit tired, but it is in that overall uptrend. What we need to do is get good entry points so we will be in good shape depending on which way the market goes. We can cut off whichever every side goes against us relatively quickly, and then move the other way in more depth. We just need the market to make a decision and make a break. We are still getting some good moves, but we sure want to bank some gain. We have some great positions that are accumulating gain, but we need the market to make a break one way and hold it for a bit so we can make some gain, and then it can go the other way if it wants to.

Enjoy your Labor Day and be thankful for what you have. Be thankful for everyone who works so hard to make this country go, and that is what we will keep doing. We will make it go again, we just have to be patriots and take care of our country. We will be great. Have a wonderful weekend.

Support and Resistance

NASDAQ: Closed at 2018.78
2070 is the September 2008 intraday low
2099 is the mid-September 2008 closing low
2169 is the March 2008 double bottom low

2016 is the early August peak
1984 from late September
1962 is the bottom of the August 2009 range.
1947 is the October gap down point
The 50 day EMA at 1937
1897 is the October post gap intraday high.
1880 is the June peak
1862 is the July peak
1786 is the November intraday high
1780 is the November 2008 closing peak
1773 is the May intraday peak
1770 is the mid-October interim peak
1673 is the prior April peak
The 200 day SM A at 1672
1666 is the intraday January 2009 peak
1664 is the May 2008 low
1661 is the April 2009 prior peak
The January closing peak at 1653 (intraday)

S&P 500: Closed at 1016.40
The early August intraday peak at 1018
1044 is the October 2008 intraday high
1106 is the September 2008 low
1133 from a September 2008 intraday low
1185 from late September 2008
1200 from the July 2008 low

The November 2008 peak at 1006 closing 1007.53 intraday
992 is the August 2009 consolidation low
The 50 day EMA at 979
956 is the June intraday peak
944 is the January 2009 high
935 is the January closing high
932 is the July peak
930 is the May peak
919 is the early December peak is bending
899 is the early October closing low
896 is the late November 2008 peak
888.70 is the April intraday high.
882 is the early May low
The 200 day SMA at 882
878 is the late January 2009 peak
The prior April peak at 876
866 is the second October 2008 low
857 is the December consolidation low

Dow: Closed at 9441.27
9620 is the August 2009 peak
9625 is the October 2008 closing high
10,365 is the late September low

9387 is the mid-October peak
9116 is the August low
9088 is the January 2009 peak
The 50 day EMA at 9099
8985 is the closing low in the mid-2003 consolidation
8934 is the December closing high
8878 is the June peak
8829 is the late November 2008 peak
8626 from December 2002
8588 is the May high
8581 is the July peak
8521 is an interim high in March 2003 after the March 2003 low
8451 is the early October closing low
8419 is the late December closing low in that consolidation
8375 is the late January 2009 interim peak
The 200 day SMA at 8352
8315 is the February 2009 peak
8307 is the April 2009 intraday high
8221 is the May 2008 low

Economic Calendar

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

September 04 - Friday
Average Workweek, August (08:30): 33.1 actual versus 33.1 expected, 33.1 prior (no revisions)
Hourly Earnings, August (08:30): 0.3% actual versus 0.1% expected, 0.2% prior (revised from 0.3%)
Nonfarm Payrolls, August (08:30): -216K actual versus -230K expected, -276K prior (revised from -247K)
Unemployment Rate, August (08:30): 9.7% actual versus 9.5% expected, 9.4% prior (no revisions)

September 08 - Tuesday
Consumer Credit, July (14:00): -4.0B expected, -10.3B prior

September 09 - Wednesday
Crude Inventories, 09/04 (10:35): -372K prior

September 10 - Thursday
Initial Jobless Claims, 09/05 (08:30): 560K expected, 570K prior
Continuing Claims, 09/29 (08:30): 6200K expected, 6234K prior
Trade Balance, July (08:30): -27.4B expected, -27.0B prior

September 11 - Friday
Export Prices ex-ag., August (08:30): 0.2% prior
Import Prices ex-oil, August (08:30): -0.2% prior
Michigan Sentiment-Prel, September (09:55): 67.8 expected, 65.7 prior
Wholesale Inventories, July (10:00): -1.0% expected, -1.7% prior
Treasury Budget, August (2:00): -162.0B expected, -111.9B prior

By: Jon Johnson, Editor
Copyright 2009 | All Rights Reserved

Jon Johnson is the Editor of The Daily at

Technorati tags:

No comments: