Market Still in Position to Bounce

SUMMARY:

- Better economic data should have aided the Thursday reversal . . . but it didn't.
- Who cares category: GDP clicks up a tenth in its final revision
- Durable goods orders post a very decent showing with some good upside revisions.
- Geithner admonishes Congress that the budget agreement needs to include 'revenue' aspects, i.e. tax hikes. We have already bailed out their favored companies and now they want us to bail them out?
- Even with the selling the market is still in position to bounce, but there is just no upside follow through.
- Darn few earnings warnings as the warnings season draws toward its end. Lower energy could lead to surprises for Q2 results, and with the market set up for a bounce that could give us the fabled summertime rally.

MARKET SUMMARY

Unable to hold another promising upside move, but still hanging in at support.

What can you say about the action on Friday or, for that matter, the entire week? Thursday there was a reversal off the 200 day EMA. This was after the market tried to rally early in the week but sold off. It held support again and bounced nicely to end the session. On Friday the sellers came right back in, and the indices fell back down to trade and close in the same range they have been in for the past couple of weeks. There was some better economic data that may have aided the Thursday reversal and continuing movement to the upside. China was more upbeat with respect to pricing pressures. It thinks it has things under control. That is like a coach getting a vote of confidence when it comes to central banks and governments talking about having inflation under control. It seems like the market figured it out anyway; propaganda is still one of the main exports from China.

There was other good news. The final GDP number came in at 1.9%, and that was a tick better than the 1.8% prior. Durable goods were very solid at a 1.9% gain. When you take out transports, they were 0.1% less than expected, but it was good-enough data to make a difference. Yet it really did not. Futures were lower from the open and did not recover too well. The market did put on a good move -- or at least tried to put on the face of a good move. It gapped lower but then reversed to rally to the upside, turning positive. Then the sellers came in big time and sold the market into the mid-morning. It tried to rebound and progressively failed the rest of the day, making lower highs and lower lows into the close. Looking at the chart, they did not implode; they were just unable hold their ground.

NASDAQ had its issues thanks to ORCL. Its earnings were decent but not enough to impress investors. It slid back to the 200 day EMA but is still in that recent range. The small caps look decent. They slid back as well, but they are well inside their range. There was a relatively minor loss when looking at other action in the market. Again, it was a day that found no traction. It was part of a rather frustrating week. Everyone trying to catch a rally to the upside or a selloff to the downside was somewhat disappointed. That does not mean we did not make decent money this week on the trades we closed. We made good upside money. Not huge gains, but it did what we wanted it to. Caught a nice move up and made some great money there. We enjoyed that but could never get the break one way or the other. We banked some good gain on short term and some longer term we held. We could not get the move we wanted for the new stuff, however.

Did I say it was a bit frustrating? Yes. I also want to reiterate that the indices are still holding a key support level. They found no purchase on Friday after what looked to be a good reversal, but they did not give up the goods. They are still there in position to move. The question is whether they are going to get the impetus they need to make the break higher. They have to find some kind of follow through, and they will. The market always does, but it does it in its own time. First you have frustration that things are not moving well. You lose a little interest, and the next thing you know you have the break one way or the other.

I do not want to sound pollyanna, but even with the Friday pullback, the market is still in position to rally. Why am I focusing on a rally versus the downside? We all know I feel the bias is to the downside. I think things are ugly in the economy and that it will bear more bad fruit for the market. Near term, however, it is still holding up. Despite the negative news and the fact that the market has sold off and failed to hold a bounce higher off the 200 day EMA -- whether you are looking at the SP500 or the NASDAQ -- it is still holding in there. Thus I feel it can still deliver the upside bounce. That is just a feeling coupled with some patterns I see from decent stocks, but it is strong enough for me to keep looking to the upside. It is not strong enough for me to give up on the downside and close all of our plays. As a matter of fact, we picked up some QID (NASDAQ) just to balance out the portfolio. We have some upside on the SSO (SP500) and on the SMH (SOX). We have some IWM out there. We also needed more balance, so we took a bit of the downside on the techs to give our index plays a bit of balance and a little hedge.

We will wait and see which way it breaks and go heavier that way. For now, I always want to try picking up money on these interim swings. With the indices holding at some key and relatively near support, we have to stay open to the idea that the market can still bounce despite how frustrating it has been in trying to hold a move.


OTHER MARKETS

Dollar: 1.4182 versus 1.4259 Euro. The dollar had a big day. Looks as if the dollar is trying to make the breakout again. Now it has formed the inverted head and shoulders. It is back up toward the neckline. It looks strong to make the move higher. A higher dollar would mean either a weaker Europe and a stronger US or some degree of variation in the two. It could be that we had better economic data; that did not hurt. Even though we know that Greece will be bailed out after what happened Thursday. There is an agreement among the triumvirate of the IMF, the EU, and Greece. There was some movement on the austerity in Greece as well. You would think that might help the Euro, but instead the dollar was the main beneficiary. It is looking stronger. That is probably to the chagrin of the Obama administration and its desire for a weaker currency to aid in its export-nation economy.

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


Bonds: 2.87% versus 2.92% 10 year US Treasury. Bonds had on outstanding day. Bonds rallied and pushed yields lower. Overall bonds were not up all around in the US, but the benchmark 10 year was very strong, continuing its rally and starting to make the next breakout. Why would it be stronger on a supposedly stronger economy with the improving economic data on Friday? It is probably because no one really believes it will be permanent. They think any positive increases in economic data would be, to use the Fed's word, "transitory" as the economy continues to find its way lower.

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


Gold: $1,500.90, -19.60. It was another thrashing for gold as it broke below its trendline and its 50 day EMA. It was the first time below the 50 day EMA on the close since mid-February. We will see if it can make a reversal. It was cruising, not having any trouble at all. It just broke free of the early-June peak and, as is often the case, it is a vulnerable point. When you break down or break to the upside, you can see a reverse occur. That is exactly what happened on Thursday, and it was some follow through on Friday. Again, we will give it a day to see if it was a false breakout and it can recover over the 50 day EMA. With two downside days, it will have to prove it.

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


Oil: $91.16, +0.14. This was the day after the "big" 60M barrel release was announced from the Strategic Petroleum Reserve. Oil did not fare that well, but it was not bad. It is still struggling. Oil had already broken down, even before the announcement of the release. Those tend to be transitory. They can be timely. Maybe if it was done when the problems in Libya first emerged. 2M barrels a day were taken offline, and it could have had an impact in that case, showing that the non-producing nations (but those with oil reserves) were willing to do what it takes to keep prices down. They did not. They hesitated, and even people on the left said it was a politically-motivated release. If it works it looks great to the uninformed. It looks as if the administration may have had a hand in bringing oil down. How many people actually pull out the chart of the oil index and see that it had already broken its trend and was breaking down once more as the announcement was made? Not many.

Oil remains weak, and that is a bonus for the economy. What is the reason for the weakness? Is it speculators going out of the market? A bit. But it is also because the economic data from the US since January pretty much stinks.

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


TECHNICAL SUMMARY

INTERNALS.

Volume. Volume jumped up. It was the Russell rebalance. We had the SP500 rebalance last week. Here we had a 37% increase on NASDAQ to 2.85B shares, and a 9% increase on the NYSE to 1.14B. That was not as big, but a lot of the Russell stocks are four-letter stocks on the NASDAQ. That is where most of the action took place.

Breadth. Breadth was decidedly downside, although not overbearingly so, as we have seen on recent downside sessions. It came in at -1.4:1 on the NASDAQ and -1.75:1 on the NYSE.


CHARTS

SP500. SP500 fell back down to the 200 day EMA. It is still in the range it has been in for the past two and a half weeks. That is roughly at the 200 day EMA and the March low. The fact that it has not given up the goods at this point indicates to me that it still wants to try a bounce. I don't think it will get out of it. That is pretty much going to be the end of the line for it, but nonetheless it could be the point where it does make a bounce.

Looking at the Fibonacci chart, it is putting in a double bottom near the 78% retracement level. That is a good indication that you could get a bounce. If you see a double bottom at the 78%, then you get a bounce that could theoretically take you up to the old highs -- but we have way too much resistance in here. We are still looking at the early-April peak to early-March peak as the potential bounce points. Just keep that in mind. It has not giving up this range. It is holding at the 200 day EMA and right around the 78%. It is trying to put in a double bottom, and it should yield an upside. We will see.

NASDAQ. NASDAQ has been one of the dogs, getting beaten pretty hard lately. It was down 1.25%, but it, too, held near the 200 day EMA on the close. Volume jumped as it made that move, but note how it was not nearly as big a move as we have seen on some other sessions. That volume jumped up as it held support. That could suggest that buyers are still stepping in to push it back up. It tested and actually broke its March low. This prior week it bounced off of it, and it is holding above that level. That is a positive. No one wanted to think of this as a positive session. It really was not, but overall the compilation suggests that we may still get that bounce higher that takes NASDAQ up into the range, maybe near that early-April peak.

SP600. SP600 did not have a bad day. Relative strength, only down 0.7%, holding at the 10 day EMA. Selling, but not selling off. Still inside the trading range that they recovered early last week. Again, that is not bad action. Small caps are economic indicators, and they are holding the line. We can take some heart from that. If they can break higher, that is great. But I don't think they will do much more than that. I do stand open to any change that is for the positive.

SOX. SOX was beaten about the head and shoulders, down 2.5%. But it did manage to hold above its recent lows and in its recent range. It is definitely in a downtrend. It is having a hell of a time getting it together, but it still looks good for a bounce up into the lower reaches of its trading range. That 50 day EMA sitting right on the upper support level sure looks like a logical place for the SOX to try to hit. That is at 419, and SOX closed at 392. That gives it a nice 27 point run up to that level.


LEADERSHIP

Financial. There was not much leadership here. JPM was down to a new rally low -- a rally to the downside, of course. GS was the same story. WFC is actually looking somewhat lively, holding above the 20 day EMA. Maybe it will provide some real leadership and hold the move to the upside.

Industrial. CAT is hanging in there. It is trying to continue the bounce off its 200 day EMA. Gotta love that. CMI is doing the same. It is bouncing, not off its 200 day EMA, but it undercut its March low and has bounced right back up. It is testing that level right now. It may be able to make the move upside. I am still looking at UTX to the downside. It may fall. Not showing negative MACD, but it is just a weak pattern. You have your head and shoulders, and we are looking for a fade off of this shoulder. If it continues on Monday, it is likely time to pull the trigger.

Technology. AAPL faded back, but it is holding near its 200 day EMA. It may still try to move a bit higher in its range before it folds the tent and heads lower. GOOG looks like crap as it continues to find new lows on the selloff. One of the problems for NASDAQ was the ORCL earnings. It did hold near the 200 day EMA. Just like NASDAQ, and it may try to make a bounce off of that level.

Metals. The precious metals and gold had a hard time, but copper had a good day. FCX was down, but copper bounced higher on indications (or propaganda) that China may be feeling better about its future. Steel is struggling, but it is holding the bottom of its range as well. Aluminum is at the 200 day EMA. All those patterns are very similar. If we get a bounce, they are all going to go up. They are trying to hold up. BHP is trying to hold that 200 day EMA. A bit weak. It is in a good downtrend, but we will see what happens. We could get that break to the upside. In this market, with a lot of these stocks it is basically about which government will issue what report next. Good, bad, or indifferent, that is what is driving much of this. That is unfortunate. Even so, trends are trends and we can still make money playing them.

Healthcare/Drugs. These sectors performed very well. I thought they would perform better as the economy slowed, and they did better and then hit some rocky times. They are starting to move back up. HNSN had a nice break to the upside off of a double bottom with handle. That is sweet. BIIB is getting it together after that gap higher. Good volume, but it is a Russell thing, of course. Maybe that is what is driving these higher, but they look really solid on the session. EXAS has been defying the market, continuing higher. Not huge moves but slow and steady to the upside. Looking very solid. ELOS looked like it was dying, but it is trying to break back to the upside and perform. There are leaders out there. You have to delve around and look for them, but they are showing up.

These have somewhat of a defensive flavor to them, but that is the flavor of the month given the market. With the rest, we are looking for bounces from stocks that we have upside positions in. These are stocks that are able to make good moves. You know the ones I am talking about. BIDU has made a good bounce for us, and we are looking for it to continue that move higher in any relief move this coming week. There are stocks in good shape and moving up, and sectors that look good overall. Then there are stocks that have had the snot knocked out of them but have come back to a support level and are moving up off of there as well. They may not lead to new highs, but they can make us money if this relief bounce continues in the coming week.


THE ECONOMY

TO VIEW THE ECONOMY VIDEO CLICK THE FOLLOWING LINK:

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

GDP hardly worth comment.

Durable Goods Orders and the revisions are very encouraging.

Administration says revenues need to be a part of the debt reduction, but facts are pesky to deal with. No matter how much we are taxed, revenues will remain relatively constant.


THE MARKET

VIX. Volatility was up 1.81 on the VIX to 2110. That bounced the VIX off of the 200 day EMA. On Tuesday and Wednesday it sold back down to the 50 day EMA, but each day it reversed off of that level. After breaking higher and looking as if it would roll back over, the VIX has found support and it will try to rally. That could mean there is more selling ahead. We will see. I think there is more selling ahead. It is just whether it occurs Monday, Tuesday and/or Wednesday or if it holds off, lets the market try a bounce and pushes it back down to the 50 day EMA level again. Then it sells off and we have a spike higher to a more meaningful level that could indicate a reversal.

VIX: 21.1; +1.81
VXN: 22.58; +1.82
VXO: 21.59; +2.19

Put/Call Ratio. The put/call ratio jumped back over 1 on the close, coming in at 1.07. It has been putting in a lot of closes over 1.0. With the recent ups and downs in the market, it actually started coming back somewhat, but the preponderance is over 1.0. That is a contrary indicator. The more pessimistic investors become, the more likely that they are wrong that the market is going to turn. That is why I say we have a lot of pessimism even though volatility looks like it wants to bounce. I think we will get another extension of the relief rally. That would help bounce the market up, give a little upside, and make most of the investors feel good just in time to rip the rug out from under them and have them fall back down. I think that will happen. We get another bounce and then, boom, you get the selloff that goes deeper.

Put/Call Ratio (CBOE): 1.07; +0.04


Bulls versus Bears:

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

Bulls: 37.6% versus 37.0%. Edged higher as the market bounced early in the week. Still on the trend lower, down from 45.2% in the past three weeks. 35% is considered bullish. Getting there rapidly. Well below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. The crossover level at 29% bulls from July 2010 is long gone. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 28.0% versus 26.0%. Continuing the climb after that big upside burst last week from 22.6%. Passed the 23.1% hit to start April and putting the moves on 28.3% from September 2010, just as the market pulled out of that base. The 35% level is considered bullish for the market overall. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: -33.86 points (-1.26%) to close at 2652.89
Volume: 2.85B (+37.81%)

Up Volume: 761.09M (-368.91M)
Down Volume: 2.21B (+1.556B)

A/D and Hi/Lo: Decliners led 1.4 to 1
Previous Session: Advancers led 1.14 to 1

New Highs: 65 (+21)
New Lows: 53 (-18)

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

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

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


SP500/NYSE

Stats: -15.05 points (-1.17%) to close at 1268.45
NYSE Volume: 1.142B (+8.87%)

Up Volume: 871.03M (-598.97M)
Down Volume: 3.7B (+1.08B)

A/D and Hi/Lo: Decliners led 1.76 to 1
Previous Session: Decliners led 1.55 to 1

New Highs: 88 (+20)
New Lows: 112 (-59)

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

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


DJ30

Stats: -115.42 points (-0.96%) to close at 11934.58
Volume DJ30: 280M shares Friday versus 207M shares Thursday.

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


MONDAY

Next week there is a load of economic data. We have Personal Income and Spending, which is always important. Case/Shiller and Consumer Confidence is out on Tuesday. Pending Home Sales on Wednesday. Thursday there are Initial Jobless Claims and then the Chicago PMI. There is also the ISM on Friday. That is the national manufacturing, ant that will be very important. It is expected to come in just over the 50 level, the threshold for expansion and contraction. At 51 it could still be expanding. I do not think it will contract. There are only two regions, and they only did it this month as well. It usually takes a month or two before the national reflects that. If they keep heading down, of course it will go negative. That would be a blow to everybody -- the current administration and all of us. It is not good at all.

There is a lot of data out, and we are also getting very close to earnings season. Have you noticed that there have been few warnings and most of them have been positive? They are talking about how good things will be, so we might have a decent summertime earnings season. It is very possible because we still had a low dollar. We may be having some lower energy prices, although they will not factor into this as much. As we know, oil had already broken its trend before the SPRO was opened. That is our little secret I guess. It peaked back in late April, so you would say there has been a goodly amount of reduced energy prices during this quarter. That would help the bottom line for most every company out there.

There is the potential that we get upside surprises yet again. That would be a boost of confidence even if it does not boost the market. This is a tough time of the year for the market, but we have late-summer rallies. We are getting set up for a late-summer move. Yes, the fabled summertime rally that everyone looks for and often never sees. It does happen, and it is usually in July into August before things get gnarly in September and October.

There are setups for upside, and then there are setups for upside. If we look at what the market is showing us right now after this pullback since the late-April peak, we are getting a setup. We are holding old support, holding the 200 day EMA that has risen below the indices. They are in position to rally. Do they rally on the numbers? They usually start rallying ahead of time. If we go into next week with few warnings, the market starts to sniff out that it may be a good earnings season. Then you start your rally before the numbers come out. You get a few boosts on the actually numbers, the rally holds for awhile, and then it runs its course and starts to roll over into September and October. That sets up nicely.

That leads me right back to where I started the day, looking at a frustrating week. The market was up, down, looked like it was going to go back up, but then it could not make the move. That is okay. We are still in a position to make that rally. We have exposure upside and downside. We have some plays we can throw either way. We are well-represented right now. We do not have to take a lot of new plays. We will have some plays to look at, but we will not go crazy looking for every little play out there. That would not be productive at this point. We have very good stocks that can move for us. They are in positions to do so.

We have already taken gain on quite a few of those positions. If we get another good move to the upside, that is just lagniappe. We will look for more positions. There will be some to the upside and some to the downside. I want to play the break whichever way it comes. Things are frustrating. People are getting frustrated in the market. You can see the traders and the financial stations getting that way. That is good. The market will break one way or the other. I think there is still a good possibility for an upside break before it rolls over hard once more. That will make us some money to the upside. I am not against that. I am not against making money to the downside either.

As a matter of fact, I am pretty much for making money regardless. That is what I'll try to do for you, and what you have hopefully been able to accomplish. I will see you on Monday, and we will see if that bounce delivers. When it does, do not get greedy. Take the gains and enjoy the move. Dump the positions that are not working too well that we get a better exit point on. Then play the downside if things roll over.

Have a great weekend!


Support and Resistance

NASDAQ: Closed at 2652.89

Resistance:
2676 is the January 2010 low
2686 is the January 2011 closing low
2706 to 2705 is the April 2011 low and the February 2011 and consolidation low (bottom of the trading range)
2723 to 2705 is the range of support at the bottom of the January to May trading range
The 50 day EMA at 2730
2759 is the May low
2762 is the February low
2796 is the February gap down point
2816 is the early April peak. Key.
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak
2888 is the May 2011 peak
2956 from November 2000
3026 from October 2000 low
3042 is the May 2000 low

Support:
The 200 day SMA at 2652
2645-2650ish from December 2010 consolidation
2603 is the March 2011 intraday low (post-Japan low)
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak


S&P 500: Closed at 1268.45
Resistance:
1275 is the January 2010 low, early January 2011 peak
1295 to 1294 is the April 2011 low and the February 2011 consolidation low (bottom of the trading range)
The 50 day EMA at 1305
1313 from the August 2008 interim peak
1318.51 is the May low
1325-27 is the March 2008 closing low and the May 2006 peak.
1332 is the early March peak
1340 is the early April 2011 peak
1344 is the February 2011 peak is being challenged again
1364 is the March 2007 low
1370 is the August 2007 low
1371 is the recent May 2011 peak

Support:
The 200 day SMA at 1263
1255 is the late December 2010 consolidation range
1249 is the March 2011 low (post-Japan)
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak


Dow: Closed at 11,934.58
Resistance:
The 50 day EMA at 12,239
12,283 is the March 2011 peak
12,391 is the February 2011 peak
12,605 is the mid-May 2011 high
12,876 is the May high
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,110 from the March 2007 closing low
12,094 is the April 2011 low
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
The 200 day SMA at 11,777
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak


Economic Calendar

June 21 - Tuesday
Existing Home Sales, May (10:00): 4.81M actual versus 4.78M expected, 5.00M prior (revised from 5.05M)

June 22 - Wednesday
MBA Mortgage Index, 06/17 (07:00): -5.9% actual versus +13.0% prior
FHFA Housing Price I, April (10:00): 0.8% actual versus -0.4% prior (revised from -0.3%)
Crude Inventories, 06/18 (10:30): -1.711M actual versus -3.406M prior
FOMC Rate Decision, June (12:30): 0.25% actual versus 0.25% expected, 0.25% prior

June 23 - Thursday
Initial jobless claims (8:30): 429K actual versus 413K expected, 420K prior (revised from 414K)
New Home Sales, May (10:00): -2.1%, 319K actual versus 305K expected, 323K prior

June 24 - Friday
Q1 GDP, third estimate (8:30): 1.9% actual versus 1.9% expected, 1.8% prior
Durable Goods Orders, May (8:30): 1.9% actual versus 1.5% expected, -2.7% prior (revised from -3.6%)
Durables ex-Transports (8:30): 0.6% actual versus 0.7% expected, -0.4% prior (revised from -1.6%)

June 27 - Monday
Personal Income, May (08:30): 0.3% expected, 0.4% prior
Personal Spending, May (08:30): 0.1% expected, 0.4% prior
PCE Prices - Core, May (08:30): 0.2% expected, 0.2% prior

June 28 - Tuesday
Case-Shiller 20-city, April (09:00): -3.9% expected, -3.61% prior
Consumer Confidence, June (10:00): 60.3 expected, 60.8 prior

June 29 - Wednesday
Pending home sales, May (10:00): 2.0% expected, -11.6% prior. Oooh, that is reaching out with hope and change.
Crude oil inventories (10:30): -1.71M prior

June 30 - Thursday
Initial Jobless Claims (8:30): 420K expected, 429K prior
Chicago PMI (9:45): 53.5 expected, 56.6 prior

July 1 - Friday
Michigan Sentiment Final, June (9:55): 71.8 expected, 71.8 prior
ISM Index, June (10:00): 51.1 expected, 53.5 prior
Construction Spending, May (10:00): -0.5% expected, 0.4% prior

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Germany Knuckles Under, Greece Gets Bailout

SUMMARY:

- Market in great position to bounce, gets a continental push, then once again, cannot hold the move.
- Germany knuckles under and Greece gets a bailout. Question is, will Greece voters take it?
- June preliminary Michigan Sentiment falls more than expected.
- May LEI doubles expectations, but the LEI is not that leading.
- More China stats showing its economy is struggling.
- Selling appears pervasive, suggesting the economy is worse than many expect.
- Market still set to bounce but not expecting any upside breakout when it does.


MARKET SUMMARY

Stocks ready to go, get the catalyst, cannot hold the move yet again.

The market was perfectly set to move higher. It was in great position with the SP500 at its 200 day EMA and NASDAQ at its March low. It got a continental push, so to speak, from the $170B "final" (as they call it) bailout of Greece. Germany had to knuckle under and agree with respect to some bond holders, but they did it. France got its way, and things looked pretty good from the start.

Futures were up on the news. Everyone was happy that Greece was getting its final bailout, so the stage was set. Stocks indices were at the right place. There was a trigger and stocks started to the upside. Once again, however, they could not hold it. They could not even hold a one-day rally, so to speak, on Friday. Why do I say that? They started nicely higher. NASDAQ gapped back above its 200 day EMA. It just could not hold the move, and it reversed and closed lower. Indeed, it was at a closing low for this pullback, eclipsing the March low. It was not the best day for stocks. Even SP500 rallied. It managed to hold a 0.3% gain but it tapped its 10 day EMA on the high and faded back. Not a lot of strength on the day.

I cannot call it a total washout. SP500 finished positive as did the SP600 and the Dow. NASDAQ, -0.3%; SP500, +0.3%; Dow, +0.36%; SP600, +0.04%; SOX, -1.5%. Not a great day. Stocks started higher and closed off the high. Again, not a total washout because some were higher. It was, after all, quadruple expiration Friday which often leads to volatility. There was also the SP500 rebalance after the close to get things ginned up. There was going to be a lot of back and forth anyway. I will just put it in that light, and we might see a new rally attempt next week.

Indeed, after things settle down, it very much could do that because there has been no real change. The indices are still at the same place they were on Thursday. They are still oversold, and there is actually some decent news with the bailout. There was also the May Leading Economic Indicators in good shape. They doubled up expectations. There are some positives out there. It could still see the move higher, but the selling is pervasive. On Wednesday the market could not find any footing.

On Thursday the SP500 held and tried to rally. It did bounce off the lows, but it never got great footing. We had the rally on Friday, and it faded back. Not able to hold that move. It is rather discouraging action when there are reasons to rally (you would think) but stocks are unable to hold the move. They have the opportunity; there is the setup at the prior support. There is reason, whether it is the Greek bailout, Leading Economic Indicators, or maybe some good earnings. They still cannot seem to keep the move going. Indeed, some important stocks gapped and then reversed on Friday.

AAPL gapped and reversed, and it is trying to break down through its trading range. FFIV continued the dive through the bottom of its range. NFLX did not cave. It can still go higher, but it was a disappointing session. That is the way a lot of investors and traders feel about the market right now. They are getting somewhat exasperated. It keeps looking like it will bounce, but then it does not. That definitely tells us something about what is going on. I talked a lot about the economic issues. There is still a lot of encouraging commentary about this being just a short-term slowdown. They say things will improve just as they did after last summer. Yesterday I said that this is not last summer. This is a top versus a base. That seems pretty fundamental, but when people get in a certain mindset, sometimes it is hard to shake them out of it.

There is the base an inverted head and shoulders and there is a top. It is different. We have a slowing economy. Last summer we had one that was still trying to pick up. After all, we had 3% growth in Q4 triggered by QE II. Now there may not be any more Quantitative Easing. The economy has been slowing down since day one of 2011. This past week there was more evidence of that occurring when the Philly Fed slipped into contraction itself, the second region to do so.

Thus, it is not a great story for the stock market or our economy down the road. Growth areas are lagging. The market cannot seem to get any real traction even when it has the reason to do so. As I said, it had the opportunity and the trigger, but it cannot get any traction. This is really evidence that there is much more of a problem with the economy. Many have this idea that we will snap out of it as we did last summer. That may be absolutely wrong. The growth indices, NASDAQ and the small caps, have been clearly lagging this last move. They are in much worse shape than the SP500, which is populated more by stocks that benefit from the export economy.

While there was no washout on Friday, it did not mean that the market would reverse. It is very discouraging. We will get a rebound at some point. The market is oversold, and markets give rebounds even if they are heading lower overall. We will get an oversold bounce out of this, but it just reinforces my belief that it will only be an oversold bounce. It may not be as solid as we wanted it to be. It may not come close to the February peak and set that right shoulder.

That said, I want to give a big caveat. Look for change when most traders start to get discouraged. I have to admit, it has been frustrating this week. The market will try to move, and it throws it right back in your face. That is how these markets work. Keep taking the good risk/reward plays when they are there. If they work, then they work; if not, you get out of dodge. I still think we can definitely get an oversold bounce from this selling. The question is where it moves. The February peak may be out of the picture. Early April peak is a maybe, but that is close to the February peak. We have to start looking mid-range, something along the mid-April low. There is a gap up point from late March in that area. Looking back in late February, that is roughly where it held on a closing basis moving into early March as well.

The sights for the upside have to be truncated. The quality of the move may not be that the solid. Frankly, given the action, that is what you should expect. As I said, moves often occur when people get very discouraged. Keep an eye out. We will still keep looking for those good plays. They are still basically in the same place they were on Friday with a few notable exceptions such as AAPL and others that have had some problems. We will watch for a bounce. Overall we do not expect that bounce to succeed and even come close to a new high. We will use the bounce for short-term upside gains. We will ride some of our upside positions back up where we can exit them if they cannot continue and they start to falter. Then we will look at downside plays yet again after that setup.


OTHER MARKETS

Other markets went back and forth during the session based upon the bailout and the overlay of the US economic data released on Friday.

Dollar: 1.4303 versus 1.4191 Euro. The dollar closed lower versus the Euro. A big swing. A big bailout of Greece will do that because some of what was driving the dollar higher obviously had to do with worries coming out of Europe. Notably, Moody's said it is putting Italy up for a possible downgrade. They give and take away in the same day. Italy is a concern. There are many other problems in Europe, and it is just a harsh reality that it is not all about Greece. You also have Ireland, Italy, Portugal, and Spain. The dollar sold. The question now is will this turn into a double top or will it continue its trend break after this test?

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


Bonds: 2.93% versus 2.93% 10 year US Treasury. Interestingly, US bonds closed virtually flat on the day. The 10 year did bounce all the way to 2.97% on the yield Friday. Of course, that was selling as the EU plans were announced for Greece. It is still holding at the top of the range, still has not broken out of that range. That will be the next key move for the bond. Can it make the breakout and continue this rally? Weakening economic data and problems in Europe would enhance its chances to move out of this range. Despite the Greek bailout, no one thinks the problems in the EU are over. Not at all.

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


Gold: $1,538.10, +8.20. Gold was up on the session. It had a good day, bouncing back up, continuing the bounce off of the trendline. Still not making a lot of headway, but it is keeping its trend in place. Frankly, that is all it can do given what is happening in the other countries. It is biding its time and waiting for the inflation bug to bite again to send it running higher.

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


Oil: $93.01, -1.94. Oil had a very tough week, and it closed down again. Note how it tapped at the 200 day EMA on the low. It also tapped the December and January peaks of its trading range that spans December through mid-February. It has come back to a key support level, and it bounced off of that level intraday. That is exactly what you would expect it to do. The question is will it turn and rally here? I do not think so. It may try to bounce. It has been very stubborn over the past month and a half, trying to hold after that big gutting to start May. Now it is breaking down below the bottom of that range, but it does have support. It may try to hang in this range some more. It may even try to bounce. Ultimately I think it will break back down into this trading range in the bottom of this range near 84. It has a significant way it can tumble.

Of course that will be good for pricing for the consumer. That may help consumers run back up their consumption, help the economy, and maybe turn some of the negatives that have caused the economy to slow (such as high gasoline prices) into positives as they come back and we buy. Of course it is all based on jobs. I will not go into a big discussion about that as I have all week, but we are not going to be creating a lot of jobs with the policies we have out of Washington right now. These are policies that have not worked in the past. I have said this for two years now, and we are just finding out that they really aren't working. There was a monetary stimulus bump from all the liquidity the Fed pumped into the world, but that is all we got out of it. We did not get anything lasting, and that is just the way it will be until we figure out that these policies do not work. Just ginning them up, redoing them, and putting more money out there will do nothing but cost us more money and put us further into debt without creating any new businesses. That is where new jobs can come from.

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


TECHNICAL SUMMARY

INTERNALS.

Volume. Volume surged to 2.4B, up 21% on NASDAQ. It surged up 34% to 1.3B on the NYSE. That was expiration and the Russell Rebalance. We cannot read too much into anything with respect to volume.

Breadth. Breadth was flat as a board. Flat on NASDAQ. 1.7:1 advancers over decliners on the NYSE. As noted, all of those indices closed higher, so you can understand there being better breadth on the NYSE.


CHARTS

SP500. SP500 bounced to its 10 day EMA. It posted a modest 0.3% gain after tapping its 200 day EMA on the Thursday low. That put it almost right at its March closing low as well as the December 2010 short consolidation range that led to a renewed breakout. It is in great position to make a bounce. We were looking for a bounce up to the February peak or the early-April peak. Probably will not get that now, but we may. If there is enough worry and frustration like we were feeling this week, that can often lead to a bounce. It could be stronger than we currently anticipate just because we are negative now. After this kind of week, it is natural to feel negative. What are we looking for? The first key area is at 1294-1295, which is the bottom of the prior range. If it can make it through there, then you start looking for these gap points around 1300. 1300 may be all it gets. A lot of traders are talking about 1300. If it gets there, there are such things as self-fulfilling prophesies, and that may be what happens.

NASDAQ. NASDAQ was ugly. It was down -0.3%. It gapped higher, rolled over, and now it has made a new closing low on this selloff. It just slightly undercut its March low right after the Japanese tsunami. The techs look bad. Below the 200 day EMA, below the low for the year. Not a good-looking scenario. Often you will have a false break. As soon as a key level is broken, you can have a reversal. With the rest of the market looking like it wants to bounce, that would be a perfect scenario for NASDAQ to bounce. We were looking for it to come up and form a right shoulder up near the early-April peak. The first test now is whether it can break back into its range at the February and April lows. That is up at 2706. That puts it almost 90 points off of that level. It gives it something to shoot for. That would be a good run in itself, and that would be the first level we would look for any bounce to fail. It might be able to make it up to these gap points, however.

It is set to bounce if the rest of the market does, but it is lagging. It looks like it is hurting, and it could fall lower if the market decides not to make the bounce. With the economy how it is, this is what tells the story. The market's inability to rally is a definite indication that the economy will not be nearly as good. It will not be the short-term transitory slowdown that so many have said it would be. Bernanke said it was that, but Bernanke also said that the housing issues would not blow up in our faces. I think we still have powder burns all over the place from those.

SP600. SP600 gained virtually nothing on the day. It is trying to hold at the bottom of its range. This looks very bearish to me. Maybe it will bounce if the rest of the market bounces, but it looks very bearish with this big doji. It has tried to pull back up. It is wedging. It has made a selloff and is coming back up near the 38% retracement. It looks like it might want to sell off, and that is not good for the economy. If these guys go down, that is an indication that the economy is in for real trouble. That would make total sense given my thesis that small businesses have been hacked, ignored, trampled, and spit upon. They would go down eventually, and that may be exactly what we will see. Even if it does bounce, it could roll right back over because we are not looking for anything strong. We are looking for just a relief bounce.

SOX. SOX was down 1.5%. It really looks weak. It is not even trying to bounce. It is at some support back from November of 2010, but that is about it. The next range of support is way down at 345, and it closed at 388. Not a strong index, and they tend to lead higher and lead lower. They are certainly down here. In any bounce you look for the 200 day EMA and the March low, and then you look for a resumption. I hate to sound overly negative, but it just does not look very good.


LEADERSHIP

Financial. Financials were actually up on the day, helping out SP500 (though not greatly). JPM posted a modest 1% gain. WFC helped out with a 2.3% gain. Looks like they are trying to make a break to the upside. There is a bit of divergence in the MACD as WFC made lower lows. It looks like there is an attempt to bounce. Maybe we can mine those for some possible plays. It has been a tough go playing those, but we will see if anything comes up that we can mine to the upside.

Industrial. Industrials continue to struggle. CAT looks like it still wants to bounce. It could help lead a bounce to the upside. With this pattern, all you are looking at is a bounce off the 200 day EMA. MMM gapped up to the 50 day EMA and reversed. It could make some moves, but it is not a great-looking pattern. There is nothing I can get too excited about. TEX sold off hard. It is trying to bounce, but it is just a relief bounce right now.

Metals. Metals are having their issues as well. FCX is back down near the bottom of its range. It got a modest bounce out of it in late May, but it has not been able to do anything since. AKS is selling off. It was selling on Thursday and it is selling again on Friday, going back to the bottom of its range without much of a bounce. That is not good technical action. BHP is at its 200 day EMA, but it has done absolutely nothing. Metals do not look sharp right now.

Healthcare. CELG is trying to hold up decently, but it is not necessarily a pattern that looks outstanding. ZOLL is up there. It gapped higher, and it may be able to continue upside. That is always something to watch. Watch those gaps. It is testing it and the 50 day EMA is coming up. Maybe it can give us something to play. ZMH is struggling, fading back. CAH is holding up decently. It may end up give us something, but it has not been a great mover. None of these have been tearing the cover off the ball. They are holding on but will not put a lot of money in our pocket. We have been playing SRCO to the downside. It gapped higher, but it looks like an intraday reversal. It may try to turn, but it looks like it has turned over and it is at significant resistance.

Consumer products. WHR continued a bounce after that nice surge on Thursday. PG has bounced off the 200 day EMA. Not great patterns here either. Recovery patterns and bounces back, that is about it. CLX is bouncing off of its 200 day EMA as well. Note the volumes. I know it is expiration and rebalancing, but watch the volumes over next week to see if they continue to perk up. That would show that the big investors are turning very conservative and bearish in this market that does not look all that great.

In short, there are not a lot of stocks leading. Traditional leaders in downside such as drugs and healthcare are holding up for the most part, but they do not look ready to surge anywhere. Personal products and consumer goods are trying to bounce. They are getting some money thrown their way. Not outstanding leadership showing up. There are some stocks that are always in position to move, but we will have to see if leadership can develop. This is getting thin. When leadership thins out, the market struggles. Lo and behold, the market has been struggling. We will need to see new bases forming up to lead the market higher. When you see good bases setting up, typically the market is ready to make a move. In all these stocks we just looked at, there were very few maybe zero bases you would be comfortable with starting a lead to the upside.


THE ECONOMY

TO VIEW THE ECONOMY VIDEO CLICK THE FOLLOWING LINK:

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

Michigan sentiment at levels that stills show a recession despite the 'recovery.'

May LEI doubles expectations but it is not really a leading indicator.

China showing the inevitable signs of trouble from government involvement in 'slowing' an economy.


THE MARKET

VIX. As the market finally broke lower, volatility broke out. It is interesting to note that the stock indices did not break below their lows, but they did break out of their ranges. As they broke out, obviously the VIX broke out as well. Now they are at their support levels. The VIX has rallied up to some prior levels. First is the mid-February peak, and then the gap up point in March. There is an island reversal, a gap up, and a gap down. Very important level. It has experienced a bit of resistance. Whether the stock market decides to rally at this point determines whether the VIX falls back down.

VIX: 21.85; -0.88
VXN: 23.58; -0.89
VXO: 21.44; -0.53

Put/Call Ratio (CBOE): 1.19; +0.07. Twelve sessions above 1.0. Friday colored by expiration, but you get the point: plenty of negative sentiment to foster a bounce.


Bulls versus Bears:

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

Bulls: 37.0% versus 40.9%. Dive, dive, dive. Bulls are running . . . out the door. Down 8 points in two weeks (45.2%). 35% is considered bullish. Getting there rapidly. Well below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. The crossover level at 29% bulls from July 2010 is long gone. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 26.0% versus 22.6%. Surging higher now (20.4% three weeks back). Easily past the 18.5% registered a month back. Moving up on the 23.1% to start April. 28.3% in September 2010, just as the market pulled out of that base. Moving toward the 35% level, above which is considered bullish for the market overall. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: -7.22 points (-0.28%) to close at 2616.48
Volume: 2.388B (+21.84%)

Up Volume: 819.22M (+160.67M)
Down Volume: 1.52B (+350M)

A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Advancers led 1.06 to 1

New Highs: 33 (+16)
New Lows: 118 (+4)

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

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

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


SP500/NYSE

Stats: +3.86 points (+0.3%) to close at 1271.5
NYSE Volume: 1.318B (+34.08%)

Up Volume: 2.82B (+950M)
Down Volume: 1.53B (-580M)

A/D and Hi/Lo: Advancers led 1.68 to 1
Previous Session: Decliners led 1.36 to 1

New Highs: 46 (+8)
New Lows: 70 (-55)

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

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


DJ30

Stats: +42.84 points (+0.36%) to close at 12004.36
Volume DJ30: 342M shares versus 190M shares Thursday.

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


MONDAY

Next week brings more economic data. Existing Home Sales on Tuesday will be important. We will have to FOMC rate decision, a two-day meeting, on Wednesday. What will it tell us? It may talk a bit more about removal of stimulus, that things are getting better, and no QE II. It may not get in anywhere near that much detail. They definitely will not make any serious statements that will change what they have said of late. With that in mind, we still have a market that looks like it could bounce. Again, the SP500 and the Dow looked fine, able to bounce. If they can, they will lead the market in a recovery move.

The selling seems pervasive. It seems pernicious, and it does not want to let go. Thus any bounce is that we have is likely to be up to a prior nearer-term resistance versus getting back up to that February peak and making that symmetrical head and shoulders pattern. It may do it. That would be a great run for our upside plays. If it does, we will take it. We have taken some upside positions, and some of them have been thrown back in our faces. Others that we have carried have been thrown at us, finally breaking support after it looked like they would hold up just fine.

There is erosion of leadership and erosion of quality stocks. That is not a good indication for the market overall. We are not looking for a breakout in any bounce we get. We are looking for some kind of move to the upside that gives us a chance to exit some upside plays and make some money on other short-term upside plays. Then we will pick up more to the downside. We made some really good money on our downside trades, and we may still make money on those if this bounce fails. If NASDAQ, SOX, and SP600 went out and are negatives, then we could definitely see more selling. You also have to look at SOX it looks like it is oversold and wants to bounce. The small caps look like they want to sell, but they will follow along to the upside a bit before they rotate down.

That leaves us back where we have been. We are looking for that bounce, and at least the indices are still at support and still in position to make the bounce. That will give us better exit points and a little upside profit. Then we can look for some more downside plays. I hate to be negative about the market. You can be negative or just say it is going to happen and it goes down. Then we use it to make money that way, playing the put options to the downside. The really discouraging part is the negative economy and how the stimulus and the hundreds of billions we spent on it have not worked. It has not created any jobs. People are still suffering, and now we will have inflation. It will be the misery index for the 70's all over again, in my opinion.

That is so discouraging. After going through those 10 years, I never thought we would have to do it again in my lifetime. I thought we had learned the lesson. After that came the boom started by the Reagan reduction of regulation and encouragement of capital investment in the US. It was fostered by Clinton as he cut the capital gains tax and stayed out of the way of the economy, trying not to do too much to it or create too many new programs. It seems like we have forgotten what got us here. In other words, we are not dancing with who brung us as Darrel Royal, football coach of Texas used to say. We got to this point, and now we have left them and are looking for something better. As is often the case, you end up settling for something worse. You can get a lot of promises. You can be beguiled out there by grand words about how things need to change, but we broke away from Europe for a reason. That was to set up a government that would allow us to pursue individual greatness. It worked very well while we followed the blueprint. We have strayed and we see the results.

It is beyond me why we would want to go back where we came from when we know what that entails. Hopefully we will wake up. Hopefully we will do what needs to be done before it's too late. Then our children and grandchildren can live in a place where they can start their own businesses, make plenty of great money, raise their standard of living, and help people around the world. I will get off my soapbox now because I did digress. I hope you have an outstanding Father's Day. Enjoy yourself and enjoy your kids and grandkids. Kudos to all the fathers out there. It is a tough job, but it sure is the best job I have ever had.


Support and Resistance

NASDAQ: Closed at 2616.48

Resistance:
The 200 day SMA at 2641
2645-2650ish from December 2010 consolidation
The 10 day EMA at 2663
2676 is the January 2010 low
2686 is the recent January 2011 closing low
2706 to 2705 is the April 2011 low and the February 2011 and consolidation low (bottom of the trading range)
2723 to 2705 is the range of support at the bottom of the January to May trading range
The 50 day EMA at 2744
2759 is the May low
2762 is the February low
2796 is the February gap down point
2816 is the early April peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak
2888 is the May 2011 peak
2956 from November 2000
3026 from October 2000 low
3042 is the May 2000 low

Support:
2603 is the March 2011 intraday low (post-Japan low)
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak


S&P 500: Closed at 1271.50
Resistance:
1275 is the January 2010 low, early January 2011 peak
The 10 day EMA at 1281
1295 to 1294 is the April 2011 low and the February 2011 consolidation low (bottom of the trading range)
The 50 day EMA at 1310
1313 from the August 2008 interim peak
1318.51 is the May low
1325-27 is the March 2008 closing low and the May 2006 peak.
1332 is the early March peak
1340 is the early April 2011 peak
1344 is the February 2011 peak is being challenged again
1364 is the March 2007 low
1370 is the August 2007 low
1371 is the recent May 2011 peak

Support:
The 200 day SMA at 1259
1255 is the late December 2010 consolidation range
1249 is the March 2011 low (post-Japan)
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak


Dow: Closed at 12,004.36
Resistance:
12,094 is the April 2011 low
12,110 from the March 2007 closing low
The 50 day EMA at 12,276
12,283 is the March 2011 peak
12,391 is the February 2011 peak
12,605 is the mid-May 2011 high
12,876 is the May high
13,058 from the May 2008 peak on that bounce in the selling

Support:
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
The 200 day SMA at 11,735
11,734 from 11-98 peak
11,555 is the March low
11,452 is the November 2010 peak


Economic Calendar

June 17 - Friday
Michigan Sentiment, June Preliminary (9:55): 71.8 actual versus 73.5 expected, 74.3 prior
Leading Economic Indicators, May (10:00): 0.8% actual versus 0.4% expected, -0.4% prior (revised from 0.3%)

June 21 - Tuesday
Existing Home Sales, May (10:00): 4.78M expected, 5.05M prior

June 22 - Wednesday
MBA Mortgage Index, 06/17 (07:00): +13% prior
FHFA Housing Price I, April (10:00): 0.3% prior
Crude Inventories, 06/18 (10:30): -3.406M prior
FOMC Rate Decision, June (12:30): 0.25% expected, 0.25% prior

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

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

Technorati tags: stock trading stock market investing Jon Johnson InvestmentHouse.com

Big Bank Tax May Not Be 3%

SUMMARY:

- Thursday just a blip as market suffers more relative carnage.
- VIX trying to break its range.
- Big Bank Tax may not be 3%. Time to celebrate?
- Exxon discovery should help our leaders discover we can wrest energy independence from our enemies versus taxing gas an extra dollar to make us buy cars we don't want.
- Market again oversold, approaching next resistance. Another downside move to start the week sets the stage for a better relief bounce.


MARKET SUMMARY

If only Thursday had sold some more . . .

It appears that Thursday was just a blip on the screen or a relief valve. It released some of the downside pressure after it tapped the bottom of the SP500 trading range and faded. Friday there was simply more carnage to the downside. Stocks opened lower as the premarket indicators were all down. It sold off hard and tried to rebound. They did cut their losses to less than 1% in the afternoon. Then, as quickly as they rebounded, they turned parabolic and sold off close to session lows. NASDAQ, -1.5%; SP500, -1.4%; Dow, -1.4%; SP600, -1.6%; SOX, -1.7%.

There were even butt-kickings across the board. Looking at the indices, there was a complete reversal of that blip to the upside. The market made it seven out of eight sessions to the downside and sharply sold. If Thursday had opened similarly to how Friday opened, we would likely have a rally ongoing as of Friday. The problem is that Thursday started higher and it did not finish the job. It was kind of like Desert Storm. We kicked the Iraqis back to Iraq and had them on the run. We could have destroyed the entire army, but we decided not to. Then we had to come back later to finish the job -- although that is debatable. It did not finish the job with the selling on Thursday. Instead it started to the upside which let all of the pressure off. When no good news came, the market sold one more time.

Just like that, the market is once again as oversold as it was on Wednesday -- indeed, even more so. The SP500 is down 7.3% in a six-week period since it peaked in late April. The selling has been back-end loaded with the past two weeks delivering most of the carnage with a 5.5% loss to start June. In the bigger picture, this is not major. It is not even a 10% correction level. Consider the impressive run out of August 2010 that no doubt started with the Fed coming in with its QE II. This selling is not even taking the market back to the March reaction low after the Japan earthquake and tsunami. Even though you can say this is nothing in the longer run, this is a significant selloff in the short term. It does not mean the market is not down hard and oversold based upon these past two weeks.

The pattern does not look that promising overall. There is a potential head and shoulders here, but I have a big caveat with that. Head and shoulders in the indices are not reliable patterns. Everyone likes to cite them and everyone can see them forming a long way off, but they typically are not reliable. You have to look over years for the indices to really see major tops called by head and shoulders. Looking at a weekly chart, there is this topping point. This is significant. There is a potential left shoulder and potential head -- they are only potential at this point. They are forming at other past support and resistance levels. That is always something to watch bigger picture.

I will get back to near term. The news on Friday was that the big bank tax may only be 2.2-2.5% versus the 3% originally discussed and endorsed (unfortunately) by Ben Bernanke and the Federal Reserve. The fact that a lower number was leaked helped "rally" the financial stocks. They were up on the day. That would have helped trigger a move upside in the market if the pipes had been flushed out properly on Thursday. Some people may say that is just speculation, and it is. It is just a theory since it did not happen, but I have seen it happen that way many times before. You have to finish the job.

What is likely to happen? There is more work to be done. No doubt that the rubber band to the downside is stretched over the near term. You have the indices breaking the old trading range and then closing in on the March lows. NASDAQ is close to its 200 day EMA and the SP500 is getting there. If things work out correctly -- and that may seem perverse to you at first when I discuss it -- we would see a further selloff on Monday and maybe through Tuesday. I would expect to see a turn at some point either on Monday afternoon or on Tuesday. That would be near the March reaction low to the Japan tsunami back in this range around the 11th of March. The move down to that point would coincide roughly with the 200 day EMA on SP500. If we get that, we should have a reversal and a very legitimate, tradeable rally that would take the indices back up towards either the early-April peak or the February peak where the SP500 failed two weeks ago and started this tumble to the downside.

Again, any rally likely will not end up at a new high. It will fail at this important resistance range and start to roll back over. It will likely give a pretty decent, reliable rollover signal. I say that noting that in February the market just gapped lower. Again in the start of June, it rallied right up to the start of the month and then showed an engulfing pattern the next day. You may get that kind of a signal, but you know to be on watch when the market gets back up into the range described.


OTHER MARKETS

Dollar: 1.4339 versus 1.4510 Euro. As soon as you badmouth the dollar, it comes rearing back to the upside. It gained ground on Friday thanks to Germany saying it does not agree with Trichet and the ECB on how they want to handle the Greek and Portugal bailout. What a surprise. That is something we have seen since day one. Germany has never wanted to bail those guys out. Every time they say they agree with something, they find a reason not to agree with it.

The dollar posted a nice gain. It was a huge move in currency terms. The dollar has bounced off its 78% Fibonacci retracement level and is doing so with the vengeance. I did not think it had the strength in it, but all you have to do is let Europe be Europe. Next thing you know, it is surging against the Euro and other currencies as well. It has an important top from late May that it will have to deal with, but it sure was an impressive move on Friday.

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


Bonds: 2.97% versus 3% 10 year US Treasury. Bonds rallied. Even with the gain, it is still in this range. It has been bouncing back and forth, unable to make the real break. It is back to the upper ends of the range, and it is close to that one-day high that broke it out of the range before it fell back in. It has really struggled over the past four weeks to get out of this range. Note that even after a good move, it is not selling off. It is just working laterally. It may be choppy right now, but it is a sign of strength that the bonds have not sold off. Maybe some of the economic news next week can change US investors' minds about the US economy and thus about whether they should be buying bonds. Unless there is a big change, I really do not see the trend for bonds changing near term.

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


Gold: $1,529.30, -13.40. Gold was down hard, and it has been bouncing up and down all week long. It is in a lateral move, holding the 20 day EMA. It tapped it on the low and bounced back to close at the 10 day EMA. Still a solid bounce higher. It is losing some momentum but is not losing ground. It is just back-and-forth chop. I expect it to make a run at that prior high. That will be the news, whether it can break this high that it hit in late April and early May. For now it is setting up to try to make that move.

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


Oil: $99.30, -3.33. Oil sold hard. It struggled again when it hit the 50 day EMA. Just as it did to start June, it turned immediately around, sold, and then it bounced up and turned again. It is in a very difficult position, but it will not die. Maybe now it will; it is technically weak. It is hanging in there more than I thought it would. Now we will have to see whether it makes the break up or down. Frankly, I think it is going down. There is not the economic support to keep it up.

If we catch a bit of a break and get this idea in the US that we can actually gain some energy independence by drilling our own lands, perhaps oil prices will continue to come down. Then we will not have to tap into the Strategic Petroleum Reserve as some people say we should do. That would be idiotic. In any event, we have the ability. We could have been drilling five, ten, fifteen, or twenty years ago. They keep saying it will not make a difference, but it would have made a difference. XOM just proved it with this huge discovery in the Gulf of Mexico.

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


TECHNICAL SUMMARY

The market is all about the technical picture right now given that we know what is happening with respect to the economic data. It has been bad going on six months now. The jobs report last week showed that the employment is starting to follow the economic data lower. That is the normal relationship between economic data and the jobs report. The jobs report lags the downturn in economic data; that makes sense.

INTERNALS.

Volume. Internals were relatively impressive as the market sold. Volume moved back up 17% to 1.98B shares on NASDAQ. All the volume is occurring to the downside. NYSE volume moved up 13% to 959M shares. Again, all of the volume is on downside days.

Breadth. Decliners on the NYSE led advancers 4:1. Decliners led advancers on the NASDAQ 3.3:1. Again, the downside days are totally outmanning the upside days in terms of market internals. I will note that new lows are still very much under control at 164 on NASDAQ and 90 on the NYSE.

Put/Call Ratio. The put/call ratio was up again on Friday, closing at 1.18. That means for every call bought, there were 1.18 puts bought. Typically there are a lot more calls bought than puts. Whenever it gets skewed to more puts are bought than calls, that is an indication the market is beginning to get overly negative and a rebound is coming. Just one close over 1.0 is insignificant. Over the past couple of weeks, however, we have had eight closes over 1.0. Over the last three weeks, that would put the number up to ten. We have had several closes over 1.0, and that is a level to get you looking for a turn in the market. All the other factors have to line up as well, though, including the internals. They are getting somewhat negative. The downside is overwhelming the upside. Of course, you also have to look at the technical picture.


CHARTS

SP500. They have broken through their trading range that held for five months and are on the way down to the March low that followed the March 11th Japanese earthquake and tsunami. The 200 day EMA on the SP500 is at 1253. The index closed at roughly 1271. It has 18 points to reach that level. Given it lost 18 points on Friday, it would not take long for it to get there. I expect it to hold somewhere between the 200 day EMA and the Japanese low and then bounce in that tradeable move. Some more downside to start to week, and then we likely get a tradeable bounce out of that.

NASDAQ. The NASDAQ is even closer to its 200 day EMA at 2628. The index closed at 2643, only 15 points away. It is not far from its March low or its 200 day EMA. There is other support in this range as well. We will likely get some kind of bounce after a bit more downside. Massive stretch of the rubber band to the downside. You can see when it has made these kinds of moves before, whether up or down, it has had to pop back afterward.

DJ30. DJ30 has been a leading indicator. It broke below its trading range on Friday. This gets interesting because a lot of people would say it is likely going to head lower and follow the others. It very well could if the pressure stays up. If the other indices reverse, though, we would see a little more downside and a reversal by the Dow as well. Something of a false breakdown that would allow it to break to the upside. I am watching this very closely. It has lagged the selling. It has showed relative strength; therefore, we would be watching for it to make a bounce to the upside as well.

SP600. SP600 shattered the trading range as well, similar to the Dow. The question is whether they can they hold the March post-Japan tsunami low and the rising 200 day EMA, as well as this range of support from December 2010 and January 2011. They are near it. After this selloff, this is roughly equal to other big moves by the index in the past. If it gets another flushout day to the downside, maybe Monday or maybe part of Tuesday, then it will be in position to reverse as well.

SOX. The SOX broke below its 200 day EMA. Disappointing it could not hold that level. You might say this could be a precursor for the other indices. It very well could be. It has also broken below its March reactionary low. Chips are leading to the downside, no doubt. It had a much weaker pattern to begin with, and they will not be a factor to the upside. They may act as an anchor chain as stocks rebound after the oversold condition they have suffered. It looked like the chips may have been trying to make a break as they move laterally. Remember, you would see these gaps to the upside -- strong moves that followed the downside. Looked like it was trying to make the break, but then it rolled over definitively. Now they are below the 200 day EMA. The first index to make that dubious claim on this selloff.


LEADERSHIP

Financial. Financials were the up sector on the day with the bank news. JPM posted a modest gain. It sold off but managed to recover. GS bounced decently. Moved up almost 2% on the day, and it was up even before the news hit. WFC bounced for a second day but not as impressively. It started lower and moved upside, but they managed to recover when that news came out.

Industrial. CAT is using up a lot of its lives on this move to the downside, closing down 2.5%. DE was a bit better. It closed roughly flat on the day, but it looks like it may try to turn back down as well. MMM turned back down. It is going negative again, but it is not a major selloff. It, too, is at a point where it could start to make a bounce similar to the overall indices. UTX looks like it is ready to break to the downside off of this lateral bear flag after the big break lower that cracked its near term uptrend.

Technology. Technology is still struggling, but some of it is holding up. AAPL is back down to its 200 day EMA near the bottom of its range again. It looks like it is at a point where it could make a bounce higher. It is in this triangle, trying to shape up and set up a new bounce. It surely did not look like it wanted to bounce on Friday. CRM is holding at the 50 day EMA. Even with two weeks of carnage, it is holding a key support level. CERN has been weak, but it is not breaking down. It is holding its 50 day EMA as well. We will see if it can hang in there. Thus far, after all of the selling, it has been able to hold that level.

Metals. FCX was down almost 2% on the day. It is still struggling and trying to set up a base, but it is very choppy. STLD is just hanging out below its 200 day EMA. Note how you have the 20 day EMA, the 10 day EMA, and the 50 day EMA heading lower. It is getting close to crossing its 200 day EMA from the upside to the downside. That is a very bearish indication. If we start seeing that in commodities, we will see them continue to sell off (DE is looking to do is same thing at the 200 day EMA. It is still rising, slicing through the 10 day EMA and now at about the 20 day EMA. The 50 day EMA is falling rapidly toward it). BHP looks like it may be trying to find a bottom at its old support range at the rising 200 day EMA. AA is similar, sitting on the 200 day EMA and added some support from where it gapped higher back in late December 2010.

Energy. Energy has been relatively decent. HAL is not surging, but it is holding up rather well. CHK is holding at support. XOM had its big find in the Gulf of Mexico, and it is trying to hold support as well. Some of the smaller ones are hanging in there. BAS is a small oil and gas service company. It is hanging in there, looking decent. CRR is holding in well, also at its 50 day EMA.

Some are trying to hold. I will run through a quick list of stocks from a broad cross-section that are performing quite nicely. ALGN is holding at its 50 day EMA. It is in the health services area. HS is also in health services, and it is holding at its 50 day EMA. ILMN is in drugs, and it is doing quite nicely, holding up very well. COH is trying to hold up as its 50 day EMA. With all of the carnage, these stocks are still making a stand at a reasonable support level. CTXS is holding at its 50 day EMA as well. RMTI is in health services, and it is moving to the upside quite nicely. SEM is holding up very well.

I will throw out a few more. WBSN held at its 50 day EMA and is bouncing. EC is independent oil and gas. It is making a little test of a nice break to the upside. It could be ready to move higher next week. VHC is in software. It is holding a nice break higher, forming a pennant. There are many stocks still in great shape and ready to move. We just have to see if they can expand and provide some upside leadership to help pick the market up and bounce it back to the upside.


THE ECONOMY

Exxon discovery should help our leaders discover we can wrest energy independence from our enemies versus taxing gas an extra dollar to make us buy cars we don't want.


TO VIEW THE ECONOMY VIDEO CLICK THE FOLLOWING LINK:

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


THE MARKET

VIX. The VIX is one area that has not been making much sense if you suspect that selling leads to an increase in volatility. For the past six weeks, SP500 has made a tremendous run lower (relative to the move higher). It sold sharply and especially hard the past two weeks. When the selling started, the VIX did pop off the top of its trading range, but that was it. It just moved laterally until Friday when it did bounce up and tap the 200 day EMA at the top of its range. Will it make a breakout now? It likely would if the market continued to sell, but the fact that volatility is not moving anywhere just means that investors are ensuring the downside for very little. They do not think there will be that much downside. That can be a problem because it can be a contrary indication. If everyone thinks the market will hold and bounce, that is typically when something else happens, such as the bottom falling out.

The VIX is pretty good at showing relationships and does not look like it wants to break higher. That would suggest that the market is going bounce. That is something I talked about last week. It just has not done it yet, but I will be watching because we are approaching a new support level that could bounce the market to the upside. The volatility is suggesting that there will be a rebound. It suggests that because it is holding its range despite the sharp selloff in SP500 and the other indices. They have not held their range, yet volatility has held its range. As the indices approach support early this week, that tells me they can put in a very tradeable bounce to the upside. Again, it would just be a bounce until proven otherwise.

VIX: 18.86; +1.09
VXN: 19.85; +0.97
VXO: 19.3; +1.32

Put/Call Ratio (CBOE): 1.18; +0.12


Bulls versus Bears:

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

Bulls: 40.9% versus 45.2%. Finally heading down at a good clip as more and more bulls throw in the towel. Finally getting the harder drop we mused about last week. Well below the 5 year high at 62.0. Fading back from the level considered bearish, i.e. where so many are in the market and believe it is going up that the ammunition to send it higher runs low. The crossover level at 29% bulls from July 2010 is long gone. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 22.6% versus 20.4%. Continuing the rise. Easily past the 18.5% registered a month back. Moving up on the 23.1% to start April. 28.3% in September 2010, just as the market pulled out of that base. Still well below the 35% level, above which is considered bullish for the market overall. For more reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


NASDAQ

Stats: -41.14 points (-1.53%) to close at 2643.73
Volume: 1.988B (+17.01%)

Up Volume: 200.82M (-731.45M)
Down Volume: 1.45B (+966.53M)

A/D and Hi/Lo: Decliners led 3.3 to 1
Previous Session: Advancers led 1.62 to 1

New Highs: 24 (-6)
New Lows: 164 (+42)

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

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

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


SP500/NYSE

Stats: -18.02 points (-1.4%) to close at 1270.98
NYSE Volume: 959M (+13.36%)

Up Volume: 709.61M (-1.83B)
Down Volume: 3.03B (+2.264B)

A/D and Hi/Lo: Decliners led 4.1 to 1
Previous Session: Advancers led 1.74 to 1

New Highs: 48 (-20)
New Lows: 90 (+21)

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

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


DJ30

Stats: -172.45 points (-1.42%) to close at 11951.91
Volume DJ30: 178M shares Friday versus 150M shares Thursday.

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


MONDAY

Next week is a full week. As far as news, economically we have Retail Sales out on Tuesday. The PPI is also out on Tuesday. CPI and New York Manufacturing are out on Wednesday. Also out Wednesday are Industrial Production and Capacity Utilization and Inventories. On Thursday we have Initial Claims followed by Housing Starts and Building Permits and our current account balance. The Philly Fed is always important. On Friday we have Michigan Sentiment and Leading Indicators.

Some of the polls out like the Rasmussen Poll show that Consumer Confidence dropped eight percentage points just in the past week. Of course, that came after the jobs report when everyone was concerned about the state of economy. It is very important data, and it is having an impact on the psyche of the American citizen. There are the high gas prices, weakening economic conditions, and the stock market selling back. Things are piling up, and it does not help the already beleaguered consumers when Sentiment starts to decline. The economic calendar tonight is courtesy of briefing.com.

I believe there will be some continued downside to start next week. After all, the market closed just about on its low on Friday. It was looking very weak and unable to rebound and further the Thursday move. Thursday was a flawed move because instead of opening lower and clearing the system for a move higher, it opened higher. That just invited the sellers to come back in. Indeed, they invited their cousins and aunts and uncles, too; they all crowded in and pushed volume to the upside on the Friday downside session.

I do believe that there is an oversold condition that will be released to the upside. That is why we were taking a little bit of gain on Friday from some of our positions. We will let the others (SPY, QID) continue to the downside. If this baby rolls as I think it will and starts to bounce back up, on Monday we will take some more of those gains. At some point on Monday afternoon or Tuesday, if it starts downside, it will start to make the turn. We can then close out some more of our gain on our downside positions. Then maybe we can take some upside positions once more and see if they will work this time.

I believe there is a tradeable rally coming off of this. I have seen it many times before in these kinds of setups. It does not mean it will move to a new high or take out the old highs. It just means I think will it bounce from around the 200 day EMA on SP500 back up into the early-April peak or the early-March peak. It even could be the February peak before it would stall out. That is a very tradeable move that can make us money. We close out our downside, after a good surge that is down again, that comes near the March low or the 200 day EMA and starts to hold and looks like it will bounce. Then we can pick up some upside. We let our continuing upside plays run. The ones that are holding after this kind of carnage will locally hold up. Many on the report are doing that. They may give another head fake down through support, but then they reverse. The odds are they will reverse after this kind of selling and at least give us a better exit point. We might do quite well on some of them.

We will let them rally. When that move peaks out, as I would expect in this range, then you sell those that are not some of the aberrations that are just holding up well and are streaking higher. Then you get ready for a downside play again. That is the market we have. That is the life we are living now, given that the trend to the upside looks to be in jeopardy. It is in jeopardy for a number of reasons. There are weakening economics and a Fed that will not go on with a QE III. It should not do that. This move, and indeed the move before it back to March 2009, is all rather false. It is all a liquidity move fed by the huge injections of liquidity that the Federal Reserve has put in the system.

We have not had any real economic growth to justify this move. Economic growth is stalling. There are two sides to this story. It is either fading into oblivion right now, or this is just a summertime pullback and things will be better. In reality, it is likely somewhere in between. I doubt we are going into a Great Depression, but things could be very ugly given the food situation as I discussed in the Thursday report. There are other problems, too, like our debt. If we do not take major steps and get back to capitalism, we are likely to lose the dollar as the reserve currency. The dollar would then plunge, similar to when the British pound lost 90% of its value after losing its status as the reserve currency post-WWII.

It is not a pretty picture. If those scenarios transpire, it could get truly ugly. We just have to take things as they come. We have to play the market with what it gives. Right now it does not look great. It looks like it is topping out for a deeper decline. Before that, we know it will not go in a straight line. After this kind of selling, you get a tradeable move. That is what we will look for to the upside. Then we will play a tradeable run to the downside that may take out that March low and ends up giving back this entire December-February run. We will just have to see what it brings us.

Things are negative now, and we are going to play from a defensive, downside standpoint. We are looking to make money on runs upside and downside. Just being aware that we are not in this kind of trending market anymore. This is a bigger top. That was a quick top, rolled over, sold and went into a base. Here we tried to base, and that base broke out but failed. We have a bigger top here. Nothing like we have had on the move up off of the March 2009 low. That is what suggests something is significantly different this time around.

With that in mind, let us keep our heads in place. Know what the market is doing and do not get too upset about the fact that the market is up or down. Just use the market to make money. That is why we have the downside plays in place. We are using it to make money as it is sold. After we get this rebound, it will probably be a lot more downside, and we probably will not have much more upside. Although, there will be defensive areas we can play such as the healthcare stocks. They have been holding up well, and then there are others that may perform.

Energy might be a sleeper. It may be surprising how well it holds up because of the discoveries we have that show we still have a lot of energy around us. It may actually become popular in the US, if we can beat the propaganda, to try to gain relative energy independence using fossil fuels. The US citizenry could discover that we do have significant amounts of oil still within our borders. Of course we should not been giving our rights away to Brazil. The idea that we would want to sell our rights to them and then buy the oil back is insane. But a lot of what Washington does right now is insane; it makes insanity seem almost normal.

Long story short, energy could be positive. We will have to see what the market yields. We will see what groups hold to the upside that we can play in what looks to be an otherwise negative market in the foreseeable future. I am not talking about years out, but just as we plan for the summer and into the fall. Have a great weekend!



Support and Resistance

NASDAQ: Closed at 2643.73

Resistance:
2676 is the January 2010 low
2686 is the recent January 2011 closing low
2706 to 2705 is the April 2011 low and the February 2011 and consolidation low (bottom of the trading range)
2723 to 2705 is the range of support at the bottom of the January to May trading range
2759 is the May low
2762 is the February low
The 50 day EMA at 2768
2796 is the February gap down point
2816 is the early April peak
2825 is the 2007 closing peak.
2841 is the February 2011 peak
2862 is the 2007 peak
2888 is the May 2011 peak
2956 from November 2000
3026 from October 2000 low
3042 is the May 2000 low

Support:
2645-2650ish from December 2010 consolidation
The 200 day SMA at 2628
2603 is the March 2011 low (post-Japan low)
2580 is the November 2010 closing high
2569 is the November gap up point through the April 2010 peak


S&P 500: Closed at 1270.98
Resistance:
1275 is the January 2010 low, early January 2011 peak
1295 to 1294 is the April 2011 low and the February 2011 consolidation low (bottom of the trading range)
1313 from the August 2008 interim peak
1318.51 is the May low
The 50 day EMA at 1318
1325-27 is the March 2008 closing low and the May 2006 peak.
1332 is the early March peak
1340 is the early April 2011 peak
1344 is the February 2011 peak is being challenged again
1364 is the March 2007 low
1370 is the August 2007 low
1371 is the recent May 2011 peak

Support:
1255 is the late December 2010 consolidation range
The 200 day SMA at 1253
1249 is the March 2011 low (post-Japan)
1235 is the mid-December 2010 consolidation low
1227 is the November 2010 peak
1220 is the April 2010 peak


Dow: Closed at 11,951.91
Resistance:
The 50 day EMA at 12,342
12,283 is the March 2011 peak
12,391 is the February 2011 peak
12,605 is the mid-May 2011 high
12,876 is the May high
13,058 from the May 2008 peak on that bounce in the selling

Support:
12,110 from the March 2007 closing low
12,094 is the April 2011 low
11,893 from March 2008 closing low
11,867 from the August 2009 high and peak on that bounce in the selling.
11,734 from 11-98 peak
The 200 day SMA at 11,687
11,555 is the March low
11,452 is the November 2010 peak


Economic Calendar

June 10 - Friday
Export Prices ex-ag., May (08:30): 0.5% actual versus 0.9% prior (revised from 1.0%)
Import Prices ex-oil, May (08:30): 0.4% actual versus 0.6% prior
Treasury Budget, May (14:00): -$57.6B actual versus -$59.0B expected, -$135.9B prior (no revisions)

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

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

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