Incomes Plunge on Tax Maneuvering

MARKET SUMMARY

- Low to high action returns as stocks over come a weak start but cannot push out of the recent range.
- Distribution on the week, but indices held support and recovered some ground.
- Incomes plunge on tax maneuvering, Construction Spending plunges.
- China and Europe remain weaker.
- As with 2011 and 2012, so many reasons for stocks to correct.
- Unlike 2011 and 2012, Bernanke has QE in place and says it is going to stay.
- Someday a major tumble will come as a result of all of this, but not now. For now, watch out for DC taking your retirement accounts 'for your own good.'

Stocks closed out the week and started the month with a mixed session as the midcaps and semiconductors lagged, but the large cap indices were able to sequester some gains. Note how smoothly I worked that into the opening line. Stocks held their ground on the week, despite the obvious desire to test, as Bernanke promised the money was here to stay. Stocks, similar to the sequester, may not feel the impact of the money in a week, two weeks, three weeks, or even a month. But it is there, working on the market.

SP500 3.52, 0.23%
NASD 9.55, 0.30%
DJ30 35.17, 0.25%
SP400 -0.41%
RUTX 0.40%
SOX -0.36%

After squandering a nice gain Thursday, stocks posted low to high action, overcoming a soft start.

Volume fell once again on the upside: -5% NASD, -8% NYSE

A/D: weak at 1.3:1 NASD, 1.2:1 NYSE.

NASDAQ
Stats: +9.55 points (+0.3%) to close at 3169.74
Volume: 1.848B (-4.99%)

Up Volume: 1.18B (+170M)
Down Volume: 676.75M (-318.16M)

A/D and Hi/Lo: Advancers led 1.33 to 1
Previous Session: Decliners led 1.05 to 1

New Highs: 108 (+3)
New Lows: 38 (+18)

S&P
Stats: +3.52 points (+0.23%) to close at 1518.2
NYSE Volume: 645M (-7.99%)

A/D and Hi/Lo: Advancers led 1.19 to 1
Previous Session: Advancers led 1.02 to 1

New Highs: 221 (-70)
New Lows: 59 (+11)


DJ30
Stats: +35.17 points (+0.25%) to close at 14089.66

Did the session change anything? Not really. Technically the indices are still chopping around in a 1.5 week lateral move after peaking, suffering some sharp distribution, but managing to hold the trend (for most indices) on the week's lows. The session helped the patterns a bit, stretching the move laterally and trying to build a consolidation shelf to calm things down in an attempt to extend the move higher.

Despite the distribution on the week stocks held the line at support, and that is the key feature of the week.

GOOG provided the leadership for NASD, AAPL did not. AMZN is trying to set up. Homebuilders were blase, industrial machinery ditto. Retail had some bright spots from DECK and BBY, while M and some friends set up decently. Some biotechs and medical stocks rallied, e.g. SNSS, CELG, BABY, BMRN. This group suddenly revived.

Still some leadership holding and emerging in this market chop. Choppy action allows stocks to set up and there are those using the chop to do just that.

OTHER MARKETS
Dollar stronger yet again, topping a strong week: 1.3029 vs 1.3087 euro.

Bonds rallied yet again post-Bernanke: 1.85% vs 1.88% 10 year

Oil sold hard, falling to the 200 day EMA: 90.68, -1.37

Gold faded modestly: 1572.60, -5.50. Trying to bounce off a possible double bottom.


ECONOMIC DATA:

Personal income tanked: -3.6% vs -2.4% expected. Biggest decline in 20 years as citizens prepped for the tax hikes (end of Bush, new Obama) by early dividends, taking bonuses early, etc. That is what happens when taxes are going up.

ISM: 54.2 versus 52.4 exp, 53.1 prior. Not bad on top of Chicago.

Construction Spending, January: -2.1% vs 0.5% exp, 1.1% December.

Michigan Sentiment: 77.6 vs 76.3 exp.

China PMI fell to 50.1, the lowest in 5 months. China would rather have some slowing than the inflation it is feeling so it withdrew money from the system and is willing to live with it.

Europe showed more weak data even if the German and France PMI beat (50.3 and 43.9, respectively).


NEXT WEEK

To sum up the week there was more distribution and rather weak upside. With the insider selling (record 50:1 selling to buying ratio last month), the size of this run that equals the past two extended upside move, the market looks winded. That is the technical look.

Yet, the indices held where they needed, bounced (some), and are moving laterally as they try to set up a new upside move. Mr. Bernanke assured us all the QE was here to stay regardless of what others on the FOMC say. The economic data was warmer but also cold, enough, however, to keep the notion of slow, stumbling growth.

Obvious tensions. Unlike 2011 and 2012, there is no ending of one QE program and waiting for the start of another. Bernanke says the money is there and will be there. More than that he says the unemployment rate will not fall to 6% until 2015. He all but said the money was going to be there until that time . . . or at least for a long time.

Thus the market has money without question, unlike 2011 and 2012. It will of course still have to test, and it is doing that now. After this test/consolidation, it will want to put that money into the market and thus continue the gains.

So, we will look for the test to end and before it does there will be leaders setting up. Those are the ones to focus on because they are in the patterns, preparing for the next move. We keep tabs on them, know the play we want to make, and then when they move, make the play.

It may appear strange with so many issues, truly bad issues, facing the world and the US, we look for the market to rise. As stated earlier in the week, the bad time will come unless the US radically changes its course. History promises this and it is not different this time. Until that time is hit, however, markets can rise and rise on printed money just as they did in Rome and in other powers that became impoverished or disappeared by virtue of devaluation and debt. Keep your eyes on your retirement accounts; the government certainly is and more in DC are talking about how they can be 'used' to shore up US finances and 'guarantee protected' returns to the owners (or really former owners, right?).

Until then, we look for those stocks setting up as they are the next leaders to join those who were out in front on this move. Of course if the current leaders tests and set up new entries, who are we to not participate in that?


Support and resistance

NASDAQ: Closed at 3169.74

Resistance:
3171 is the October intraday high
3197 is the September 2012 post-bear market high
3227 is the April 2000 intraday low
3401 is the May 2000 closing low

Support:
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
The 50 day EMA at 3125
3104-3112 from August and mid-October peaks.
The 2011 up trendline at 3109
3101 is the August 2012 high
3090 is the mid-March interim high
3076 is the late April 2012 high and the 1/2013 low after gapping higher
3062 is the December 2012 prior peak
3042 from 5/2000 low and several other price points
3024 is the gap point from early May
The 200 day SMA at 3013
3000 is the February 2012 post-bear market high
2999 is the bottom of the August 2012 consolidation
2988 is the July 2012 high
2977 to 2980 is the bottom of the late October 2012 consolidation, July 2012 peak
2962 is the April 2012 low
2950 is the mid-April closing low
2942 is the mid-June 2012 high
2900 is the March 2012 intraday low
2858 is the late July 2011 peak
2847 is the mid-May 2012 low
2838 from the July 2012 lows


S&P 500: Closed at 1518.20

Resistance:
1531 is the recent high
1539 from June 2007

Support:
1499 from January 2008
The November up trendline at 1491
The 50 day EMA at 1486
1475 is the September 2012 high
1471 is the October 2012 intraday high
1466 is the September 2012 closing peak and rally closing high
1440 from November 2007 closing lows
1434 from early November 2012
1433 from August 2007 closing lows
1427 is the August 2012 peak
1425 from May 2008 closing highs and the October 2012 low
The 200 day SMA at 1412
1408 is the late October 2012 range closing low
1406 is the early May 2012 peak
1402.22 - 1400 is the closing low of the August 2012 lateral consolidation
1378 is the February 2012 peak
1375 is the early July 2012 peak
1371 is the May 2011 peak, the post-bear market high
1363.46 is June 2012 high
1359 is the April 2012 low
1357 is the July 2011 peak
1344 is the February 2011 peak
1340 is the early April 2011 peak
1332 is the early March 2011 peak


Dow: Closed at 14,089.66

Resistance:
14,149 is the February 2013 high
14,198 from the October 2007 high

Support:
14,022 from 7-07 peak
The 50 day EMA at 13,728
13,692 from 6-2007 peak
13,668 from 12-2007 peak
13662 is the October 2012 intraday high
13,653 is the September 2012 high
13,557 to 13,662
13,413 from the late September 2012 low
13,300 to 13,331 is the August 2012 post-bear market high
13,297 is the April 2012, prior post bear market high
The 200 day SMA at 13,161
13,058 from the May 2008 peak on that bounce in the selling
13,056 is the February 2012 high
12,716 is the April 2012 closing low
12,524 is a range of support from early 2012 and summertime 2012
12,391 is the February 2011 peak
12,369 is the left shoulder low from May 2012
12,284 is the October 2011 peak
12,258 is the December 2011 peak
12,110 from the March 2007 closing low
12,094 is the April 2011 low
12,035 is the June 2012 base low
The June 2011 low at 11,897 (closing)
11,734 from 11-98 peak
11,717 is the late August 2011 peak


Economic Calendar

February 26 - Tuesday
Case-Shiller 20-city, December (9:00): 6.8% actual versus 6.5% expected, 5.4% prior (revised from 5.5%)
FHFA Housing Price Index, December (9:00): 0.6% actual versus 0.4% prior (revised from 0.6%)
New Home Sales, January (10:00): 437K actual versus 383K expected, 378K prior (revised from 369K)
Consumer Confidence, February (10:00): 69.0 actual versus 62.0 expected, 58.4 prior (revised from 58.6)

February 27 - Wednesday
MBA Mortgage Index, 02/23 (7:00): -1.7% prior
Durable Orders, January (8:30): -3.5% expected, 4.3% prior (revised from 4.6%)
Durable Goods -ex transports, January (8:30): 0.2% expected, 1.0% prior (revised from 1.3%)
Pending Home Sales, January (10:00): 1.0% expected, -4.3% prior
Crude Inventories, 02/23 (10:30): 4.143M prior

February 28 - Thursday
Initial Claims, 02/23 (8:30): 344K actual versus 360K expected, 366K prior (revised from 362K)
Continuing Claims, 02/16 (8:30): 3074K actual versus 3150K expected, 3165K prior (revised from 3148K)
GDP - Second Estimate, Q4 (8:30): 0.1% actual versus 0.5% expected, -0.1% prior
GDP Deflator - Second Est., Q4 (8:30): 0.9% actual versus 0.6% expected, 0.6% prior
Chicago PMI, February (9:45): 56.8 actual versus 54.0 expected, 55.6 prior
Natural Gas Inventories, 02/23 (10:30): -171 bcf actual versus -127 bcf prior

March 1 - Friday
Personal Income, January (8:30): -3.6% actual versus -2.4% expected, 2.6% prior
Personal Spending, January (8:30): 0.2% actual versus 0.2% expected, 0.1% prior (revised from 0.2%)
PCE Prices - Core, January (8:30): 0.1% actual versus 0.2% expected, 0.0% prior
Michigan Sentiment -Final, February (9:55): 77.6 actual versus 76.3 expected, 76.3 prior
ISM Index, February (10:00): 54.2 actual versus 52.4 expected, 53.1 prior
Construction Spending, January (10:00): -2.1% actual versus 0.5% expected, 1.1% prior (revised from 0.9%)
Auto Sales, February (14:00): 5.6M prior
Truck Sales, February (14:00): 6.5M prior

March 5 - Tuesday
ISM Services, February (10:00): 55.4 expected, 55.2 prior

March 6 - Wednesday
MBA Mortgage Index, 03/02 (7:00): -3.8% prior
ADP Employment Change, February (8:15): 150K expected, 192K prior
Factory Orders, January (10:00): -2.2% expected, 1.8% prior
Crude Inventories, 03/02 (10:30): 1.130M prior

March 7 - Thursday
Initial Claims, 03/02 (8:30): 350K expected, 344K prior
Continuing Claims, 02/23 (8:30): 3100K expected, 3074K prior
Trade Balance, January (8:30): -$43.0B expected, -$38.5B prior
Productivity-Rev., Q4 (8:30): -1.6% expected, -2.0% prior
Unit Labor Costs -Rev., Q4 (8:30): 4.2% expected, 4.5% prior
Natural Gas Inventories, 03/02 (10:30): -171 bcf prior
Consumer Credit, January (15:00): $12.8B expected, $14.6B prior

March 8 - Friday
Nonfarm Payrolls, February (8:30): 165K expected, 157K prior
Nonfarm Private Payrolls, February (8:30): 178K expected, 166K prior
Unemployment Rate, February (8:30): 7.9% expected, 7.9% prior
Hourly Earnings, February (8:30): 0.2% expected, 0.2% prior
Average Workweek, February (8:30): 34.4 expected, 34.4 prior
Wholesale Inventories, January (10:00): 0.2% expected, -0.1% prior

By: Jon Johnson, Editor
Copyright 2013 | All Rights Reserved

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

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