Monday, November 16, 2009

Dollar Falls, Market Bounces

- Dollar falls, market bounces, but no change in relative position as market waits to see if liquidity comes back or the technical weakness prevails near term.
- EU emerges from recession, just not as strong as it wanted.
- Trade deficit jumps on imports, but they are not good imports.
- Return the TARP repayments to the taxpayers versus throwing it down the whole of federal debt retirement.
- Michigan a bit gloomier as jobs become a leading indicator
- Market is technically ready to trade back in its range, but it all depends first upon the liquidity and second upon the dollar.

Market rebounds from the Thursday loss but no relative change.

The market went nowhere on Friday. It was higher, but it only recaptured some of the ground it lost on Thursday when it sold back from resistance.

The market was banging its head against the next key resistance for the entire week. SP500 has its 2007 downtrend, the bottom of the 2004 lateral consolidation, and the October highs. NASDAQ has very important lows from the past three years that it is banging up against. There is that resistance met after a technically weak bounce on the one hand, and there is the liquidity held by all the financial institutions in the world on the other hand. Those are the dollars that the rest of the central banks have printed up that they are not lending out to anyone. That is what is going to determine the next move. In other words, when are the financial institutions going to push the "buy" button and move back into the market? Do they want the indices to test back inside their range over the next few weeks, or do they want to break things out now ahead of the Thanksgiving holiday and send the markets racing to new highs? That will be the determining factor as to whether the market moves higher.

On Friday, with the liquidity not coming into the market, the next most important factor was the dollar. The dollar was weaker, and it sold off after bouncing higher on Thursday (1.4915 Euros versus 1.4839 Thursday). The market sold on Thursday, but Friday when the dollar lost some strength, the market recovered and bounced back up. That did not change anything; it is still in the same position it was on Thursday and the entire week. It is bumping up against the next key resistance after a low-volume rally following higher-volume selling from the same resistance level back in mid-October. No change, only the dollar made the difference.

As the dollar goes up in price, usually you can bet that all the inverse indices - metals, energy, etc. - would go down. That was not the case. Even though the dollar did weaken on Friday, oil was down ($76.43, -0.51 versus $80 on the last bounce). It ran out of steam there again and pulled back. Gold surged ($1,119.40, +12.80).

The bond market was somewhat interesting. The 10 year closed lower (3.42%. versus 3.48% earlier in the week). There was some movement back to bonds late in the week. That shows there may be weakness ongoing in the stock market as the bond market anticipates some more selling. Stocks were higher on Friday, and bonds were higher as well. Money was moving into bonds and that usually is an inverse relationship - that could be foretelling. There may be that pullback next week starting down into the range, and that would not be such a bad thing. All it would do is put some extended stocks back into a better buy position and give the market a good breather for a move higher toward the end of the year - indeed, a move higher onto the January area where we get a January effect (or what I will call a "liquidity effect" this year).

The worst news out on Friday was that the EU GDP grew at 0.4%. It pulled out of recession, and some of its components had already done that. The gain was not as big as anticipated. Germany gained 0.7%, France 0.3%, and Italy 0.6%. Fashion and fast cars in Italy are doing the trick. On the other hand, the UK lost -0.4% and Spain was down -0.3%. There were not huge changes in the GDP, but enough to keep the overall level lower than anticipated. It was good news overall, just not quite as good as hoped. That was the case with the Michigan Sentiment report. It was lower than expected. After the market started higher, that gapped it lower, but it did not keep things down.

It was a Friday, and even though the sellers have been in the market, they are still leery of all the liquidity out there. Even though they tried to sell it off in mid-afternoon, they were not able to close the deal simply because there is a weekend coming. Liquidity is still out there, and sellers lost their nerve. The market was able to bounce back and close with gains across the board.



The SP500 gapped higher at the open and continued higher. When the Michigan Sentiment came out it gapped lower, recovered, and then moved higher for the entire session only to fade back in the afternoon. Then the market bounced back in the last hour to recoup some of the mid-afternoon losses. That closed out the indices with decent gains. NASDAQ 0.88%, Dow 0.72%, SP500, 0.57%, SP600 0.9%.

It looked like a pretty strong, up session. The Friday high was at about 1097. If you go back to Thursday, there was a high hit in the morning, and then it trended lower for the rest of the session. There was a high early in the session on Wednesday, and then a trade down all day long. That tells us that we have had a series of progressively lower highs. Even though SP500 finished up for the week, it still finished below key resistance in the form of the October peaks as well as the 2004 trading range and the 2007 downtrend line. It made a series of lower highs to end the week. While that does not look too bad on a daily chart, there are issues at work on SP500. It is not necessarily as strong as the week shows, and looking at the intraday action is one way to tell that.


SP400 is one of the reasons the internals were not bad on Friday at 2:1 advancers on NASDAQ and 2.7:1 advancers on the NYSE. The mid-caps held up well. Even though they made a lower low in early November, they have not sold off as hard and have not been lagging as bad as the small caps. They are very similar to NASDAQ's pattern, though they are still below key resistance in September that they never got through. The small caps were up almost 1% on the session. When that happens, it helps push the breadth higher. There was an improvement in the breadth, but on Thursday when the SP600 sold off, the NYSE breadth was -4:1. It was significantly stronger to the downside.

Volume on the NYSE was low once more, and it continued a string of lower session. It was slightly higher on the Thursday selling, but not significantly so. It was flatline and it is low trade, so not showing much of anything at this level. That does not necessarily mean it will hold and continue to move higher because when there is lower and lower volume as a market moves higher, it is running out of buyers. There are three levels of key resistance that it is butting up against. With the lower volume, it could simply have no buyers. It had plenty of sellers on the way down from this level in October, but there are not a lot of buyers on the way up. There can be low-volume deaths of indices. On the NASDAQ, trade was lower as well, dropping 13% and back below average as NASDAQ bounced up and hit the September peak and the middle of the October range. Thursday volume was higher as it sold back, touching average. That was the highest volume since the first day of the month, and it occurred on the downside. Once again, we see an overall lack of volume on the buy side, and plenty of volume on the downside. On the one session that it was down, the volume spiked up. We could be having the same type of issue here - a low volume (lack of buyers) death on the NASDAQ.


There are two key factors at loggerheads. There is resistance on both NASDAQ (long term resistance line) and on the SP500 with its three levels of resistance: one near term at the October peak, one longer term at the bottom of the 2004 consolidation range (where it spent a year moving laterally), and there is also the downtrend line from 2007. Three layers of ice all running together - that is a thick layer to break through. That resistance is opposed by the continuing liquidity in the market, gratis the US Fed and the other central banks in the world that have indicated that there will be no near term reduction in the amount of easy money and credit that is circulating the globe. There are two opposing forces right now, and the indices are at yet another inflection point where they will decide what they will do near term. They were at an inflection point in early November, and the liquidity won out. The volume has faded considerably as the buyers have been fewer on the rebound back up to this resistance level.

Friday's action left no relative change in the indices. They were up across the board, but after selling back on Thursday, that left them in the same place right below key resistance. SP500 is not showing any kind of major rollover. It has moved up to the resistance level, and that is important. It sold off on Thursday, but there was no real volume. It bounced up on Friday. The internals continued to be weak, and the action on the rebound was weak. It is not a strong move back up, but none of these moves have failed. Over this entire rally since March, the only moves that started to fail were in the June-July consolidation. It may very well get something like that with a low volume move higher. With all the resistance, certainly the market will need something to push it through. It would not hurt if SP500 came back and moved laterally for 2-4 weeks, consolidated and then rebounded back up. There is no major rollover, but the liquidity has not been able to drive it through the key resistance level.

As for NASDAQ, it has a clearer weakness than the SP500 as the sellers showed their hand on Thursday when volume spiked up as the index sold lower. That showed that the sellers were still a bit stronger than the buyers overall. The stronger selling volume is still outperforming the upside move, and the inability to move through that October peak and the higher volume on Thursday again shows the sellers were trying to assert their hand. There is still no definitive break down. There is a lower low and then a rebound. It is definitely not a strong technical position, and not as strong as it was in the move from July to October, but it is not a breakdown yet. It is showing indications that that may be the case, but there are still a lot of leaders on NASDAQ holding up just fine. It could come back down if it fails, and trade in the range to the 2,025 level. That would be fine. It would set up many more positive patterns for another move higher when the liquidity comes back in the market.

SP600 has been a focus because it has been lagging, and because it is the canary for the rest of the economy. Many people are saying (particularly the government) that the economy is improving while the small caps have been lagging. Indeed all of the growth indices have been lagging somewhat, and that is a concern. SP600 moved up as well this week, but it came nowhere near its prior highs, the prior peak in October, and not even the lower peak in September. It has made the lower low and is struggling at a resistance level. It sold off on Thursday, tried to recover on Friday after a selloff, but was not able to break back through that level; indeed, it closed right at the 50 day EMA.

It did rebound off the low, so there were buyers coming in and trying to push it back up, but it is still a very weak pattern. I still believe that this may be the lead for the rest of the market and it could trade down to the 290 level. That could send NASDAQ and SP500 down as well, but again they would just be in their trading range - down toward the bottom of their trading range, or even half or three quarters of the way down versus a complete selloff. I do not think the liquidity will allow a complete selloff. It will allow trading inside the range and then a move higher when buyers feel the time is right, i.e., after some of the extended leaders pull back to support or consolidate or form new bases and are ready to break higher once more. That will be a boon for a new buying opportunity if that occurs. I would like to see a pullback. We have taken some downside positions in anticipation of a potential pullback, and we now have to see how it plays out.

In sum, we have a technical setup for a failure. If it were not for the liquidity, this would be ripe for a rollover, and a serious one at that. Given the liquidity, if the buyers decide to come back in ahead of the end of the year, they could push the market higher even from these resistance levels at the October peaks. They can still push it higher from here. I am anticipating more of a pullback, but that means the buyers are willing to wait a bit.

The two forces at loggerheads are a weak technical position versus the liquidity that has been pushing the market higher. I think the liquidity will win out, but now I am leaning toward a test lower in the range. We have positions to the downside, and if they do not hold and it breaks higher over the peaks, we will close them out and will be in decent shape because we are in a very good risk/reward point.


The dollar was down on the session. There was no change in the leadership other than bouncing back somewhat after being boxed around Thursday as the dollar rebounded.

The dollar's double bottom is still holding right now. It is trying to hold at a key level back in late 2007 and 2008. If you look at the weekly chart, you see a reach down to the same lower support level and a sharp recovery. There was buying of the dollar as it reached lower. Then, as you go back to a daily chart, there was a nice surge up. It was down on Friday, and early next week will be an important time for the dollar. We will see if the 1.5-Euro level still holds and if it can make a break higher up to the 77.25-78 level. If that is the case, we will get the pullback in the indices that will take them back down toward the bottom of their trading range. Again, that is not a terrible outcome at all. It sets up some good upside buys for when it is over, and it gives great downside gains on the positions we have taken.

With that, you know that energy was higher on the session. HAL, which was in a bit of trouble, sold off early but came back. SLB looks just fine, bouncing higher on rising trade. The oil stocks are not in any serious trouble. RIG is holding up above a support level as well. There is no issue here.

Looking at metals, you see the same thing. We have a position in CLF, and it is going to town. It broke to a new rally high on higher volume, clearing the October peaks and doing so with panache as volume moved above average. Of course, there is copper and FCX. The two go hand and hand, and you cannot look at metals without looking at copper. It is making a pullback, but it is holding at support nicely. I would not be surprised if it holds the gap, continues higher, and breaks to a new high. There is nothing wrong with this chart pattern. No lower lows and nothing of the sort - just continuing strength all the way up.

While we are looking at metals, let us look at GLD, the gold ETF. We sold some gold positions on Wednesday when it gapped higher to a hanging man doji. It sold off on Thursday and it looked like that was a prescient move, but gold recaptured all of that loss on Friday and is back at a rally high. We are looking for more of a pullback - down to 106 or 105 would be an excellent opportunity to add to positions. We did not sell our entire position. We will let our current position run higher and then look for opportunities to step in as they present themselves.

Industrials were fine on the session. CAT showed a nice, tight doji at the 10 day EMA. There was a modest pullback, low volume, no lower lows, and no issues here. You can look at this and say it is a potential double top, but there is no sign of trouble at all with the rising lows. Looking across the board, most industrials are in the same position.

Retail is good and it is also not so good. ANF announced decent results and guidance, and it was rewarded. We have a play on BBY. What a nice pullback it has to test the breakout of the ascending triangle. A great pullback and low volume. It tapped near that peak, bounced up, and continues its move higher; it is going to be a buy as well. Retail is not in bad shape.

There is no change in leadership overall, but it has pulled back modestly. A lot of leadership is extended and could use a 2-3 week consolidation in the overall market to set up better positions to buy into. The question is whether the liquidity will allow the market to pull back at the end of the year. There is extension in leadership, and it would be great to have a consolidation for entry. The technical pattern looks as if the market is ripe to pull back. The question is whether the investors - the big money banks and financial institutions - are going to put that money into the financial markets before the end of the year, or if they will wait for a pullback. If they decide to pull the trigger, and the money goes into the market, it is going to trump because there is plenty of money to go into the market. There has been no removal of any liquidity around the globe. That is what we are watching and waiting for. We are playing what the market tells us to play while we wait to see what the money does. It adds that element that is not usually in the market where you can look at technicals and make decisions based on that. You look at the technical position, realize what the stocks and indices can do short term, and then overlay the liquidity on that and take your positions accordingly. That is why we are taking downside positions up against the resistance on SP500 and the NASDAQ. If it works out, we make great money to the downside. On the other hand, if the liquidity runs into the market, we have near term stops so we do not get hurt. We can have one of the scenarios where the market gaps higher or races higher and then reverses. If it does, it will usually show its hand relatively quickly. We will likely get stopped out of some positions - maybe not all of them. If we do and the market does reverse, we will get right back into it. In other words, if SP500 makes the breakout over the resistance levels and we are stopped out, when it tests this, we see whether it reverses and closes back in this range on higher volume. That would show that there has been a reversal in the move and it is going to trade lower. It could also hold and bounce up. If so, we have an upside play, and we will take it whatever way the market goes. A lot of that is dependent on when the big financial institutions want to pull the trigger with respect to putting more money to work in the markets.


Trade deficit jumps sharply as imports surge.

Trade deficit numbers were out on Friday. Without going into specifics, I will note that it was much larger than expected and the fastest-rated growth in over a decade. Imports were up much more than expected, swamping exports that were still relatively high. The dollar is low, and the administration wants to promote exports as our way out of this mess (versus helping small business), so there are more exports as the dollar was being crushed. That tends to help our GDP number. The problem is that imports totally outstripped that number, so there is legitimate concern that the GDP will be revised to something like 3.1% growth from the 3.5% originally reported. That is usually not a bad thing. History shows that when the economy is good in the United States, imports go up. When the consumer feels good, they buy a lot of domestic and foreign goods, and that typically means the dollar is stronger and we can buy more with our money. That is not the case right now, so there is to wonder how the consumer is driving the imports that high with a weak dollar. The consumer is NOT buying that much. Do not be fooled. Oil imports cost a lot more because the dollar is so much weaker, and as we come out of the zero growth from Q4 of 2008, we are using more oil than we were using then. Remember, it is not just the amount used, but how much it costs. We have to pay more as the dollar is crushed, and that drives up the deficit.

We are importing more than oil. We are importing autos and auto parts, but we are not buying a bunch of BMWs, Ferraris, and Porsches. If you look deeper than the headlines of the less-than-reputable news agencies, you see that the imports are from Canada and Mexico. That is where we get all of our auto parts. Cash for Clunkers depleted some of the inventory of cars and auto parts, so that was the gain in imports. We were not buying a bunch of foreign cars. These are domestic parts for domestic cars for our government motors, GM and Chrysler. This is no surge in consumer consumption that would indicate a healthy market. We are getting the double whammy of inflated oil prices through the dollar's decline as well as having to restock domestic parts and autos after the Cash for Clunkers program. That program cost the taxpayers over $20K per vehicle sold through the program. That sounds like the $303K-per-job saved or created through the stimulus package. What a deal for the American taxpayers. I prefer they give me the $20K and let me buy a car than to have this nonsensical government giveaway.

I had to get on my soapbox because it has been that kind of week. It has been one thing after another that just makes you shake your head and sigh. There is to laugh to keep from crying when you see what is happening in our government.

TARP to taxpayers versus to debt.

There was news that the banks are paying back their TARP funds with interest. That is nice, but Treasury Secretary Giethner says we are going to use that to pay down the deficit. What good will it do to pay it down if we do not get any growth in the economy? Even though it does sound good, it will only take money out of the economy. History has shown that the best way to pay down our deficit is for the economy to surge in a massive recovery. That has cured all deficits in the past, and it is how we got the surpluses of the 1990s. There was huge growth in R&D and a tech revolution that started in the 1980s - it has its roots there from those tax cuts that invested money in the United States. We then paid down our debt with the surplus.

We had a surplus because President Clinton raised taxes to pay our debts, and it brought in more money than anticipated because the economy boomed more than anticipated. There was only a slowdown in 1991-1992 rather than a serious recession. The economy was still throwing off billions, even trillions of dollars in revenues, so there was a huge surplus. Did the government return the excess money back to the citizens after saying it had to raise taxes in order to pay our debts? They paid them, and kept the rest of the money that would have been pumped back into the economy through the businesses, in R&D, and through the citizens consuming more. Instead of keeping the economy going, that became one of the factors (along with Greenspan's blunders) that contributed to the crash in 2000. Earned money is the lifeblood of the economy, and that taxation threw it down the hole of retiring our debt. The growth had already retired our debt and we were in surplus territory, so we should have pumped it back into the economy. That is what a good business does. It keeps some money for a rainy day, but it pumps the rest of it into growth - getting the business bigger and stronger, getting more employees, and funding more R&D. There is to do that to be a leader. That is not what we did, and it is one of the reasons we crashed.

We are getting some money back on our investment in these companies through TARP, and we are going to throw it down a rat hole of retiring debt instead of trying to revitalize small business, which is the engine of the United States (and the world) economy. Be sure to look at my video from Thursday. It was posted incorrectly because my computer played a trick on me and renamed the one from Wednesday for Thursday. We are going to keep it on so you can take a look, and in it I talk about the death of the small business in the United States. We are not going to give money and stimulate the small businesses through incentives, we are instead going to retire debt. As I said, history shows the way we get out of debt and retire our debt is to grow our economy, but they are choosing to take more money out of the system. We have taken it out of the system in these giveaways, and the money they are paying back is not going to come back to those who footed the bill. It is going to go to retiring debts that our government has accumulated and is going to continue to accumulate. I dare say it will have the same effect. We are not going to have a strong recovery. All of the metrics that gauge the strength of recovery say this is a weak recovery at best. It does not take a think tank to figure that out. You need only look at how poor the jobs are [8:56] and the prediction that the unemployment rate is going to be over 10% through mid-2010 at least. The administration is finding out that its great stimulus plan that was going to peak unemployment at 8% and create all these jobs has not done that, and it is not going to do that. History has a nasty way of repeating itself.

Today in a small business I was visiting, they were saying that we have a Jimmy Carter times two in the White House now. That is the joke among the small businesses that were almost killed off entirely in the 1970s. I got on the soapbox again, but it helps to rail at the government sometimes, right?

Michigan sentiment shows jobs are now a leading indicator.

Michigan Sentiment came in on Friday (66 versus 70.6 prior and 71.0 expected). That was a three-month low, and it was the unemployment rate that brought it down. That is what is weighing on the respondents (maybe we should call them "despondents" instead). With the new expectations of a 10% + unemployment rate through at least mid-2010, that has respondents worried about their future and spending less. Those planning to make a major purchase over the next six months fell almost 10%. It is a very difficult situation for consumers and the small businesses out there. Just to put this in perspective, the 66 level is a recession level. From the recovery in late 2001, the Sentiment recovered and averaged 89 from late 2001 to the peak in December 2007. We are nowhere near that level. 66 is a tad lower than 89. Suffice to say that when we were in late 2001 and starting to come out of that recession, Sentiment was rising rapidly because people sensed a recovery coming. Right now, it is heading the other way again - a double dip. They are despondent, and they are worried about jobs.

Jobs are a lagging indicator and are generally the last thing to turn, but when the numbers get this bad, it becomes a leading indicator because small businesses are crushed and have no money to invest. They are also getting no loans. It is an out-and-out lie when you hear the financial institutions that were bailed out by the government say that they are loaning to anybody. I had lunch with some Wells Fargo and other bankers, and we talked candidly about loans to small businesses. They said small businesses cannot have enough collateral and they cannot have a good enough balance sheet to get a loan right now. They are making more money in the stock market than they would lending it to small businesses, so they are not doing it. With small business despondency and consumer despondency over jobs, we have a serious problem creating this leading effect that the jobs report is showing. We are not recovering as rapidly as we could be. The administration is pushing exports and depressing the dollar so we can buy less here. We are hurting our small businesses because energy is purchased with dollars, so every time the dollar goes lower it costs them more to do their business when they cannot get the money they need.

WMT recognizes the problem and is cosigning with its apparel manufacturers that supply it so they can get the money they need to make the goods that WMT sells. It sees the problem and is taking proactive steps to help it. The problem is that the company that usually does this, CIT Group, was allowed to go bankrupt without one iota of concern from the administration. It is the primary lender for small businesses so they can make their payrolls and put the money down to get their goods manufactured. This administration says it is for the small guy, but every policy that it is promulgating only helps the big boys. It is pushing the strongest driver of US economy - the small businesses -out of business. When they go, it is going to be left with the big companies it is in bed with through the stimulus package such as GE and others that have made deals with the administration to get the money. It is not a good situation for the US economy, so do not be beguiled by what is going on.



VIX: 23.36; -0.88
VXN: 22.92; -1.13
VXO: 22.27; -0.95

Put/Call Ratio (CBOE): 1.01; +0.16. More bets that the market is going to fall nearer term. Not enough closes over 1.0 to mean anything at this point.

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: 48.3%. Surprisingly holding steady for the second week after a drop from 49.5% two weeks back. Still a lot of believers in the rally, and that may be to investors' detriment near term as the market consolidates a bit more. Bulls have held in the 48% to 50% range for several weeks now though that will start changing some now, and that is for the better in terms of a renewed upside move. Still 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: 24.7%. A rise as expected, but not a surge despite the rather sharp, high volume selling to end October. Bears remains relatively low, hardly in excess numbers but not so low to start looking for a reversal. Last week 22.5%, and hanging around in the 23% range before that. Hit a low of 21.3% on this leg. 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: +18.86 points (+0.88%) to close at 2167.88
Volume: 1.833B (-13.18%)

Up Volume: 1.407B (+553.779M)
Down Volume: 477.105M (-952.991M)

A/D and Hi/Lo: Advancers led 2.01 to 1
Previous Session: Decliners led 3.13 to 1

New Highs: 59 (-10)
New Lows: 41 (-6)





Stats: +6.24 points (+0.57%) to close at 1093.48
NYSE Volume: 971.403M (-7.52%)

Up Volume: 681.453M (+534.117M)
Down Volume: 273.51M (-603.846M)

A/D and Hi/Lo: Advancers led 2.73 to 1
Previous Session: Decliners led 3.93 to 1

New Highs: 157 (-49)
New Lows: 34 (-3)




Stats: +73 points (+0.72%) to close at 10270.47
Volume DJ30: 167M shares Friday versus 183M shares Thursday.



There are the loggerheads of a weak technical picture versus the liquidity. When are the big financial institutions going to put that money back in the market? It is like Hamlet: To invest or not to invest? That is the question for the guys with all the money. If they hold off, the dollar could continue with its double bottom bounce higher. That would send the market lower, and it would be something of a blessing for investors because it would come down, and we would make money on our downside positions. It would put many extended leaders in new position to buy. When they are ripe, when they base out a bit and consolidate, they will be ready to buy and we could move in because you can bet that the big boys holding the money will see that as an opportunity as well and push the button. We can hope that that is what they do. If they hold off, then we get a nice rally on into Christmas and into January with the liquidity effect for early 2010. We will have to see how it plays out.

We have downside positions in play, and we were not taking any new positions on Friday. We have upside positions that we are letting run higher as well. We can see which way the market goes. If it goes higher and makes the breakout, then we will close our downside positions because we picked them up at a good place right at the resistance level. We will not lose much on it, but it is a good bet for a rollover because the technical picture certainly indicates that that is what the market wants to do (but for that liquidity hanging out there). The liquidity is the wildcard rolling around on the deck, and we have to play ball with it. When it comes in, it is the 800-pound gorilla in the room - can I string together enough metaphors? In any event, when the liquidity comes in, we have to make note of it and play accordingly.

We will look for the pullback. The market is ripe for that technically, and we will see if we get it. If we do, it will be a nice payday that sets up new buys, and we will go forward. We will have upside plays and downside plays for the start of next week, so we can take it whichever way it goes. We still have the three scenarios in effect. There could still be the breakout and the reversal. There could be a stall out as it has been doing thus far. We could also get the breakout, then it comes back, tests, holds, and then moves higher. We will play whichever one the market wants to give us. I will see you next week.

Support and Resistance

NASDAQ: Closed at 2167.88
2167 from the July 2008 intraday low
2168 is the September 2009, intraday peak
2169 is the March 2008 closing low (double bottom)
2177 is a low from March 2008
2191 is the October 2009 peak
2210 (from September 2008) to 2212 (the July 2009 closing low)
2275 - 2278 from the February 2008 and April 2008 lows

2155 is the March 2008 intraday low
2143 is the October 2009 range low
2099 is the mid-September 2008 closing low
The 50 day EMA at 2095
2070 is the September 2008 intraday low
2060 is the August peak
2048 is the early October 2009 closing 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
1897 is the October post gap intraday high.
1880 is the June peak
1862 is the July peak
The 200 day SM A at 1818

S&P 500: Closed at 1093.48
The March/July up trendline at 1094
1101 is the October high
1105 is the 2007 down trendline
1106 is the September 2008 low
1133 from a September 2008 intraday low
1185 from late September 2008
1200 from the July 2008 low

1080 is the September 2009 peak
1078 is the October range low
The 18 day EMA at 1075
1070 is the late September 2009 peak
The 50 day EMA at 1056
1044 is the October 2008 intraday high
The August peak at 1040
The early October 2009 closing low at 1025
The early August intraday peak at 1018
The November 2008 peak at 1006 closing 1007.53 intraday
992 is the August 2009 consolidation low
956 is the June intraday peak
944 is the January 2009 high
935 is the January closing high
932 is the July peak
The 200 day SMA at 931
930 is the May peak
919 is the early December peak is bending

Dow: Closed at 10,270.47
10,365 is the late September 2008 low
10,609 from the Mid-September 2008 interim low
10,963 is the July 2008 low

10,120 is the October 2009 peak
The 18 day EMA at 10,019
9918 is the September 2008 peak
9855 is the early September peak in its lateral range
9835 is the late September 2009 peak
The 50 day EMA at 9813
9654 is the November 2008 high
9625 is the October 2008 closing high
9620 is the August 2009 peak
9430 is the early October low
9387 is the mid-October peak
9116 is the August low
9088 is the January 2009 peak
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
The 200 day SMA at 8689

Economic Calendar

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

November 16 - Monday
Retail Sales, October (08:30): 0.9% expected, -1.5% prior
Retail Sales ex-auto, October (08:30): 0.4% expected, 0.5% prior
Empire Manufacturing, November (08:30): 30.00 expected, 34.57 prior
Business Inventories, September (10:00): -0.7% expected, -1.5% prior

November 17 - Tuesday
Core PPI, October (08:30): 0.1% expected, -0.1% prior
PPI, October (08:30): 0.5% expected, -0.6% prior
Net Long-term TIC Fl, Sep (09:00): $35.0B expected, $28.6B prior
Capacity Utilization, October (09:15): 70.8% expected, 70.5% prior
Industrial Production, October (09:15): 0.4% expected, 0.7% prior

November 18 - Wednesday
Housing Starts, October (08:30): 600K expected, 590K prior
Building Permits, October (08:30): 580K expected, 573K prior
CPI, October (08:30): 0.2% expected, 0.2% prior
Core CPI, October (08:30): 0.1% expected, 0.2% prior
Crude Inventories, 11/13 (10:30): 1.76M prior

November 19 - Thursday
Initial Claims, 11/14 (08:30): 504K expected, 502K prior
Continuing Claims, 11/13 (08:30): 5600K expected, 5631K prior
Leading Indicators, October (10:00): 0.4% expected, 1.0% prior
Philadelphia Fed, November (10:00): 12.0 expected, 11.5 prior

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

Jon Johnson is the Editor of The Daily at

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