Stocks Setting Up For a New Move

MARKET SUMMARY

- Another comeback to flat as indices continue the consolidation through earnings season.
- Earnings overall continue their improvement for Q2.
- Anticipating improvement in Q3 GDP, but are warnings a warning sign?
- Once again stocks setting up for a new move and will FOMC meeting provide the catalyst?

Stocks muddle through another session, but it is a constructive muddle.

Not much change from Thursday, just more consolidation and not bad consolidation at that. A good development as it keeps things status quo so the lay of the land remains the same. That is good for several reasons, one being my two sons just got back tonight from a 4 week trip to the Boy Scout National Jamboree and other adventures along the way. That means the report can be nice and short and have you more than ready to take on what the market puts out next week and I can spend some quality time with my sons. Perfect scenario.

Futures were down and down significantly in the pre-market. Japan's Nikkei fell 3% as its CPI turned positive to 0.2%, the first positive read in modern record keeping (that, of course, began after the 1980's collapse in Japan that has never righted itself). Ironic, isn't it? The US Fed led by Bernanke and his Princeton henchmen WANT inflation, but Japan, after decades of deflation has its markets dive at the first whiff of inflation or as some would say, 'reflation.'


Armand (Robin Williams): 'What we really need is a woman. We can get away with Albert as an uncle if we had a woman as a mother. Ironic, isn't it? When you need a woman . . . ' from 'The Bird Cage'

China, after talking tough on austerity and relieving the imbalances in its economy without the bailouts the West has used, suggested Friday that a 'mini stimulus package.' Indeed, perhaps more than one may be necessary to tweak the economy to avoid a slowdown below the 7% threshold set earlier in the week. I TOLD you China would go back on its austerity pledges as soon as the going got tough.


If you are talking irony, I suppose this is ironic itself: no bailout, just a small stimulus package . . . or two, or three, or four. It will take stimulus packages, but it won't take a bailout.

Earnings continued their torrent and while there were still winners (SBUX, ATVI, SWK), the misses and warnings were more predominant. AMZN and EXPE missed. KLAC beat but lowered guidance. Same with ZNGA.

It was enough to put futures in the can. Not to mention the run to this point and the current sluggish yet consolidative action in the indices. It was also enough to set up some low to high action in a continuing bull run, even if the indices are a bit weary from their prior run.

Stocks tanked in the first hour despite a beat on Michigan Sentiment July final (85.1 versus 84.1 expected). After almost 1.5 hours into the session, however, stocks found their floor and rose steadily to the close. No surge, no swoosh, just bringing prices back up towards the flat line.

SP500 1.40, 0.08%
NASDAQ 7.97, 0.22%
DJ30 3.22, 0.02%
SP400 -0.52%
RUTX -0.54%
SOX -0.90%

Volume fell 18% on NASDAQ back to average. NYSE trade faded 12%. Upside but not a lot of buyers pushing it.

Breadth matched, recovering but not making it to positive. -1.1:1 NYSE, -1.7:1 NASDAQ.


SP500 and DJ30 undercut the 10 day EMA held thus far, but then recovered nicely to hold the 10 day EMA on the close. SP400 showed similar action. NASDAQ didn't undercut; it was stronger on the session and posted a decent gain. RUTX lost ground but it held the 10 day EMA on the low and recovered some losses.

So, when it was all over the indices displayed very solid action, fading, recovering, showing another shakeout in the consolidation. In that sense Friday was a constructive session as the indices held onto what they had while working off the excess from the 4 week upside run.

It seemed unlikely they could hold the gains and continue without a further consolidation, but each session they spend with this type of action improves the chances they hold onto the gains and continue on.


THE NEWS: Earnings

Q2 results have posted overall decent earnings, i.e. bottom line, beats. That has been the case for the past several quarters. The problem is top line misses. Revenues continue to disappoint as companies cannot grow sales thanks to a 1.5% or worse economy (Q2 will be significantly worse by the time the last revision is made). That started to change the past week with more top and bottom line beats.

All is well then? Not yet. Many economists, analysts, horoscope readers, etc. are pointing to a better Q3 and entire second half of 2013 that will cure all ills. Just like 2011 and 2012. Didn't take. Surely the law of averages will catch up.

Guidance suggests maybe that, sadly, won't be the case yet again. Here are the midpoint readings on SP500 earnings.

293 reported as of Friday. The mix of the earnings is as follows:

Bottom line results: 73% report bottom line earnings topping expectations.
Top line results: 54% report sales beating estimates.

The four year average of top line beats: 58%. Some improvement last week but needs to pick up to match the average.

Guidance: 54 companies have issued guidance. 43 negative, 11 positive.
80% providing lowered or negative guidance. 5 year average is 62%.

Beat margin: This is the percentage of companies beating estimates. The 4 year average is 7.0%. At the midpoint of Q2 earnings it is running 3.2%. If this holds it is the second lowest since Q1 2009 when QE1 was announced.

There is still time for earnings to recover and they have improved the last week. If they do great. The worry is the guidance. It is not good.

Statistics provided by Factset.


THE MARKETS

OTHER MARKETS

Dollar: 1.3287 versus 1.3248 euro.

Bonds steady: 2.56% versus 2.57% versus 2.58% versus 2.50% versus 2.48% versus 2.49% versus 2.53% 10 year Treasury.

Oil: 104.59, -0.90. Holding the 20 day EMA on the low.

Gold: 1321.60, -7.10. Still at the 50 day EMA, still trying to break higher.



TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: +7.98 points (+0.22%) to close at 3613.16
Volume: 1.687B (-18.11%)

Up Volume: 786.56M (-763.44M)
Down Volume: 977.67M (+372.02M)

A/D and Hi/Lo: Decliners led 1.66 to 1
Previous Session: Advancers led 1.92 to 1

New Highs: 148 (-83)
New Lows: 18 (+1)

S&P
Stats: +1.4 points (+0.08%) to close at 1691.65
NYSE Volume: 533M (-12.05%)

A/D and Hi/Lo: Decliners led 1.13 to 1
Previous Session: Advancers led 1.38 to 1

New Highs: 147 (-56)
New Lows: 117 (-68)


DJ30
Stats: +3.22 points (+0.02%) to close at 15558.83



SENTIMENT INDICATORS

VIX: 12.72; -0.25
VXN: 12.93; -0.39
VXO: 12.08; -0.35

Put/Call Ratio (CBOE): 0.98; +0.02


Bulls and Bears:

Bulls faded slightly as did bears, but negligible. After a lateral to slightly lower move in some of the indices, a bit of bullishness left. Didn't quite hit the levels in February and May.




Bulls: 51.5% versus 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 19.6% versus 19.8% versus 22.9% versus 25.0% versus 21.9% versus 22.9% versus 20.8% versus 19.8% versus 19.8% versus 19.8% versus 18.8% versus 19.6% versus 20.6% versus 20.6% versus 19.4% versus 19.6% versus 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%.

Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

Huge week of news. The second half of SP500 starts reporting earnings. Consumer Confidence. First read of Q2 GDP. Chicago PMI. FOMC rate decision. ISM index. Jobs report.

Last time the FOMC announced a result or Bernanke talked the stock market rallied. That is different from the February, April and other occasions when tapering was broached and investors choked. We were told this past week there wouldn't be any issues in keeping interest rates low.

As noted Thursday when this Hilsenrath article was released, interest rates are not the issue. Interest rates were low long before March 2009. Long before. It was not until the Fed started on QE, i.e. injecting liquidity directly into the system, that stocks bottomed and rallied. The QE has maintained all of the gains thus far. Each time a QE episode ran to its end the stock market stumbled. Each renewal of QE and the rally continued.

Interest rates remained low the entire time. They are the least consequential of the Fed's actions. Indeed, the Fed may even be losing its ability, if it ever had it, to control interest rates once they want to do something on their own as they have of late.

The Fed keeps talking about interest rates. The market rallies on QE. It's like an irresistible force and an immovable object on a collision course.



They are talking but neither appears to be listening to the other. I remain concerned about when they figure it out. Maybe I am wrong and it is all understood: taper starts in September but rates remain low. But, does it seem logical that the market would rally if this is what it believed Bernanke was saying?

Thus I remain concerned about the rally if all of the sudden the market realizes Bernanke is serious about taper. Again, I am likely wrong, but I hear the Fed talking interest rates remaining but not anything else.

Until that turns out to be the case, if it does at all, as long as stocks continue to set up we continue to participate in the move. With earnings producing some upside moves or helping set up patterns further there are more plays coming online to take advantage of. The consolidation action in the indices helps form those patterns. As they make the upside breaks, we plan on moving in until the market transitions lower. Ride her until she bucks you as Roy Tin Cup McAvoy said in 'Tin Cup.'



Support and resistance

NASDAQ: Closed at 3613.16

Resistance:
The July 2013 at 3625
3641 is the upper channel line for the November 2012 to present uptrend.

Support:
The 10 day EMA at 3586
3549 is the November 2012 up trendline
3532 is the May intraday high
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 50 day EMA at 3480
The 2011 up trendline at 3306
3295 is the June 2013 low selloff
3227 is the April 2000 intraday low
The 200 day SMA at 3220
3197 is the September 2012 post-bear market high
3171 is the October intraday high
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
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


S&P 500: Closed at 1691.65

Resistance:
The November up trendline at 1702

Support:
1687 is the May high and post-bear market high
The 10 day EMA at 1683
1654 is the June 2013 peak
The 50 day EMA at 1643
1576 from October 2007, the prior all-time high
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
The 200 day SMA at 1531
1499 from January 2008
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


Dow: Closed at 15,556.49

Resistance:
The November up trendline at 15,810

Support:
15,542 is the May 2013 intraday high
The 10 day EMA at 15,500
The 20 day EMA at 15,392
15,318 is the June closing high
The 50 day EMA at 15,199
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff
14,198 from the October 2007 high
The 200 day SMA at 14,181
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
13,784 is the late February 2013 closing low
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


Economic Calendar

July 26 - Friday
Michigan Sentiment - Final, July (9:55): 85.1 actual versus 84.1 expected, 83.9 prior

July 29 - Monday
Pending Home Sales, June (10:00): -1.7% expected, 6.7% prior

July 30 - Tuesday
Case-Shiller 20-city, May (9:00): 10.5% expected, 12.1% prior
Consumer Confidence, July (10:00): 81.6 expected, 81.4 prior

July 31 - Wednesday
MBA Mortgage Index, 07/27 (7:00): -1.2% prior
ADP Employment Change, July (8:15): 175K expected, 188K prior
GDP-Adv., Q2 (8:30): 1.1% expected, 1.8% prior
Chain Deflator-Adv., Q2 (8:30): 1.2% expected, 1.2% prior
Employment Cost Index, Q2 (8:30): 0.4% expected, 0.3% prior
Chicago PMI, July (9:45): 51.5 expected, 51.6 prior
Crude Inventories, 07/27 (10:30): -2.825M prior
FOMC Rate Decision, July (14:00): 0.25% expected, 0.25% prior

August 1 - Thursday
Challenger Job Cuts, July (7:30): 4.8% prior
Initial Claims, 07/27 (8:30): 345K expected, 343K prior
Continuing Claims, 07/20 (8:30): 2995K expected, 2997K prior
ISM Index, July (10:00): 51.5 expected, 50.9 prior
Construction Spending, June (10:00): 0.2% expected, 0.5% prior
Natural Gas Inventories, 07/27 (10:30): 41 bcf prior
Auto Sales, July (14:00): 5.7M prior
Truck Sales, July (14:00): 6.8M prior

August 2 - Friday
Nonfarm Payrolls, July (8:30): 175K expected, 195K prior
Nonfarm Private Payrolls, July (8:30): 195K expected, 202K prior
Unemployment Rate, July (8:30): 7.5% expected, 7.6% prior
Hourly Earnings, July (8:30): 0.2% expected, 0.4% prior
Average Workweek, July (8:30): 34.5 expected, 34.5 prior
Personal Income, June (8:30): 0.5% expected, 0.5% prior
Personal Spending, June (8:30): 0.4% expected, 0.3% prior
PCE Prices - Core, June (8:30): 0.2% expected, 0.1% prior
Factory Orders, June (10:00): 2.2% expected, 2.1% prior

By: Jon Johnson, Editor
Copyright 2013 | 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

Detroit files for bankruptcy. Some recovery

MARKET SUMMARY

- Some resilience despite GOOG, MSFT earnings bombs yet market just takes a moment.
- Money moving into US equities funds.
- Slow day but doing what it needs to do.
- Global economies slowing but oil is spiking.
- Detroit files for bankruptcy. Some recovery.
- Getting toward the limits of recent runs. Will earnings and money push indices higher or will they wait for the new month?
- Leaders still there and as they set up, with the money moving in, we will look at more.

Despite GOOG and MSFT's earnings misses, the session was, by any measure, pretty darn boring and pretty darn resilient. A little boring and a little sluggish is what happens when you have a great three week rally, new highs, some resistance, and investors looking for the next reason to buy.

Now they might indeed be finding that reason, at least the big money managers who truly move the market, and thus the market's resilience in the face of some fairly crappy revenue reports yet again. Friday we all learned that cash inflows to US equities funds surged the most since money was dumped into the market to start the year. Remember that January 2 gap higher on NASDAQ a month into the bounce off the November low? You can see it on the chart. That triggered the next leg in the November to present rally. Can it keep this rally running with just a modest consolidation?

Of course there was no NASDAQ upside gap Friday thanks to MSFT and GOOG stinking the place up. Indeed a gap down was the actual result. Even so, the indices were mixed with a rather casual session, particularly for expiration, as stocks overall continue to take a moment after the three week run from June.


'We should all take a moment and remember the real victim in this incident. The pig.'
--John 'the Biscuit' Cage in 'Ally McBeal' addressing the jury in court.

I mean the market is showing some effect from a bevy of big name top line misses (GE, MSFT, GOOG, KO, UPS, etc.) and other out and out misses period (again, GOOG and MSFT), but you would not know it from looking at Russell 2000 or SP400. Of course those don't have the likes of MSGOOG so there you go. Even NASDAQ, the index taking it for the team with two big players missing, easily held above the 10 day EMA and the May peak, the last high in the move.

What is going on with tech? MSFT you can understand. It has not had an original idea since DOS and it bought the first DOS from some unsuspecting schmuck for $50K after Gates told IBM Gates' company had developed a disk operating system. It succeeded when Steve Jobs trusted Gates with the guts of the Mac operating system. Jobs was livid, Gates laughed all the way to the bank.



You ****ed up, you trusted us. I think I ****ed up, I trusted him.
(PG-13)

Of course Apple got its Macintosh ideas from Xerox because Xerox management balked at the idea of the company selling anything that had a mouse. Vision. It is a great thing.

Overall, however, the 'old' tech is struggling as the PC morphs into something else whether a tablet, phone, watch, glasses, suit, or whatever. There is a big struggle for Dell, and it is a big cash cow, but frankly it is not the future. Those vying for it are simply trying to buy a cash stream for as little as possible. Period. Michael Dell may have some other romantic notion as it is his company since college days, but he is the only one.

Reasons for Google's miss? Perhaps sharing data with the government is not what people really want after all. People still do have a choice of search engines to use. Not much of a choice, however, as there are few alternatives that do not track everything you do on the web and then grab their toes every time the feds ask for the data (PG-13 reference). In any event, a miss by any other name.


Boring and resilient equals slow. Earnings are in full swing and the market is feeling the effects of a bevy of top line misses, and in some cases, bottom line as well. Overall, however, this is a very casual pullback and in many cases not a pullback at all. NASDAQ and SOX are taking the brunt of the 'blow' in the consolidation, but it is more akin to a slap on the wrist as both hover just above the 10 day EMA. Quite a selloff indeed.

The action Friday was low to high, some indices higher than others. NASDAQ struggled all session with the twin albatrosses GOOG and MSFT. Those did not help SP500, but it had other outlets to push it higher. For the large cap NYSE indices it was another day of lateral to slightly higher gains. The prior Friday to Thursday the big indices worked laterally in an 'in place' consolidation. Thursday they again rallied; Friday they held steady, not quite making that big break yet. SP400 midcaps and RUTX small caps never really stopped to consolidate, just slowed the move a bit.

With the money flowing into equity funds, it seems the indices want to keep moving higher, or at least hold their gains versus selling back. Resilient again comes to mind given the earnings, Bernanke's testimony (many still say no taper in September; I think they will be sad), and spiking oil and gas. Regional manufacturing reports from Philly and New York, however, managed to buoy spirits as to the economic outlook.

SP500 2.72, 0.16%
NASDAQ -23.67, -0.66%
DJ30 -4.80, 00.03%
SP400 0.13%
RUTX 0.02%
SOX -0.22%

Volume surged on NYSE by 28% and bumped 4.5% on NASDAQ, both above average, as expiration spurred Friday's trade.

Breadth modest but higher on NYSE (1.2:1), slightly down on NASDAQ (-1.1:1), indicating it was indeed a large cap issue for techs (NASDAQ 100 declined 1.07%; tells the story).


THE NEWS

There was some end of the week news, but even though significant, it appeared to be lost versus Bernanke's congressional testimony and the high profile earnings.

Detroit filed for Chapter 9 'uncle' bankruptcy, as the same city the President promised he would not let fail is now saying the city gets no bailout. Someone said the city should be bulldozed in strips and rebuilt. I posted pictures awhile back of Hiroshima and Nagasaki Japan versus Detroit. Utter devastation to current modern metropolises. Not saying Detroit should be nuked; it still has beautiful buildings, but some areas are forsaken, and those comparisons give the bulldozing idea some appeal. Of course it would need some new industry; that is a matter of the available labor force, whether local government will embrace growth policies, and if they get the mindset away from government handouts.



US equity funds, as noted above, received $16.4B the past week, the fifth largest injection ever.

Goldman Sachs' Global Leading Indicator shows that the global cycle is back to slowing. Still positive, but momentum is slowing toward the flat line yet again. At the same time Markit's global business confidence survey fell to a post-2007/2008 crisis low in June. The US and China are key components in the slowing as money supply growth is slowing in China and in the US, already slow commercial bank lending is slowing at a sharper pace.



WTI oil moved past Brent for the first time in three years even as more and more US oil is produced.

SEC sues hedge fund manager Steve Cohen in a CIVIL SUIT for failing to prevent insider trading among other claims. It seems inherently wrong that the government can sue an individual in civil court versus criminal court for breaking laws in order to achieve a lower burden of proof than in a criminal case. In the 'old days,' civil suits were left for citizens and non-government entities. In an all-powerful government, however, this is not surprising.

This as the Washington Post reports the NSA in testimony to Congress said they sure tried to keep their data gathering program secret in response to inquiries as to how they thought they could keep us in the dark. Hero or villain, Snowden let us see something we all suspected was happening was indeed actually happening. In a case of strange bedfellows, former President Carter says Snowden's actions were a net positive as he informed us of illegal actions by the NSA. There you go.



THE MARKETS

OTHER MARKETS
Dollar modestly weaker: 1.3136 versus 1.3109 euro. The dollar is under pressure once the market decided the Fed may not be so bent on cutting the taper.

Bonds bouncing: 2.49% versus 2.53%. After breaking lower Thursday and looking like a rollover, TLT bounces right back to the 20 day EMA. Key level. This looks as if bonds could rally again off of this low as MACD was at a higher low on the early July low.

Oil surging, kind of: 108.05, +0.01. WTI moved past Brent for the first time in three years though WTI closed well off its intraday high. Oh well, right? It broke higher from the lateral consolidation and has no weakness. Why is this with a slowing world economy and more petroleum output? Money, dear Watson. The dollar is weaker and the world is awash with liquidity. Thus even though less oil is being used and more produced, the price in dollars and the amount of money is inflating oil prices.

Gold: 1292.80, +8.60. Gold won't give up at the 20 day EMA, stretching its lateral move to over a week. Gold may just make the break higher.


TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: -23.66 points (-0.66%) to close at 3587.61
Volume: 1.75B (+4.48%)

Up Volume: 684.59M (-236.45M)
Down Volume: 1.07B (+338.99M)

A/D and Hi/Lo: Decliners led 1.1 to 1
Previous Session: Advancers led 1.64 to 1

New Highs: 224 (-122)
New Lows: 13 (+5)

S&P
Stats: +2.72 points (+0.16%) to close at 1692.09
NYSE Volume: 765M (+27.93%)

A/D and Hi/Lo: Advancers led 1.12 to 1
Previous Session: Advancers led 2.04 to 1

New Highs: 347 (-147)
New Lows: 96 (-20)


DJ30
Stats: -4.8 points (-0.03%) to close at 15543.74


CHARTS

SP500/DJ30: After a weeklong lateral move on SP500 and DJ30 into Thursday, those indices started higher Thursday and they held the move Friday. Not over near resistance, however.

NASDAQ slid up the upper channel line all week but Friday gapped lower gratis MSFT, GOOG. Held over the 10 day EMA so not a major crack and easily inside the channel. Now we see if it can regroup and move on the remaining earnings.

SP400: New highs on the week after a one-day pause Tuesday. Slowing the move but still moving higher.

RUTX: Just managed to scratch out a new closing high Friday after punching new highs Monday and Thursday. Took a midweek breather and then continued the move. Stretched thin right now, likely pulls back, but money keeps rotating and moving the small and midcaps higher.



SENTIMENT INDICATORS

VIX: 12.54; -1.23
VXN: 13.75; +0.28
VXO: 12.58; -0.92

Put/Call Ratio (CBOE): 0.79; +0.05


Bulls and Bears:

Bulls continue to surge with another impressive, indeed more impressive, gain. Bears are the lowest in 6 weeks. Nothing like gains to surge sentiment back up from the contraction of the distance between bulls and bears at the start of July. Bulls are closing in on the highs that started pullbacks. Bears are at that level right now.

Note short interest spiking toward highs of the past half year. That is still a bullish indication somewhat in contrast to bulls and bears. Note, however, that short interest has moved more in line with market movements than contrary.




Bulls: 52.1% versus 46.9% versus 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 19.8% versus 22.9% versus 25.0% versus 21.9% versus 22.9% versus 20.8% versus 19.8% versus 19.8% versus 19.8% versus 18.8% versus 19.6% versus 20.6% versus 20.6% versus 19.4% versus 19.6% versus 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%.

Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


MONDAY

More and more earnings. More data (Existing Home Sales, New home sales, Durables, Michigan Sentiment Final). More money for equities? More rotation? The latter two, with the help of some Fed-speak, have kept the now four week rally moving upside.

Overextended? Yes. Look at the April to May run. Five weeks, 150 SP500 points. Current run is 4 weeks, 133 SP500 points. Some more upside is available, but it is getting thinner. Nickels in front of an oncoming bus?

Rotation remains the key for new positions and indeed in the market further move. It pushes new stocks to the fore as leaders and keeps the market holding steady or moving up slightly as seen this past week.

Thus while the market may be near a peak for this particular leg it is generating new leaders and thus new moves. A move lives by its leaders.

Helping out to create more leaders is the money moving into the market. Fund flows are picking up as bonds sold. Ironically, bonds are set to rebound. Once investors in a certain asset feel jilted, however, the love affair is typically over, and money likely continues to leave in favor of equities.

That keeps upside pressure on stocks. The question is whether they move higher from here or not. Money doesn't defeat all market technicals; they still need pullbacks. Massive money, however, can do that. Likely, however, that money waits for more earnings and the start of the next month to come in full bore.

Earnings will jostle the cart a bit more this week as more big names report. NFLX is early in the week, Monday after the close. AMZN reports next week as well. Some important market leaders on the agenda, again. If they can show revenue growth the market might find more sustaining breath.

We will look for more possible leader plays. With money flowing into funds it will be put to work with some accumulation, and as stocks set up we want to be ready with plays for when they make the break. In addition, as stocks report, we like to make post-earnings plays. Some you can enter right after the move, others have to set up. The latter will play into a new money rush to start August. To say the least, there will be opportunity of various kinds over the next few weeks and we will have plays at the ready depending upon what those stocks and what the market does from here.

Massive move ahead? If money is starting to flow big time from other areas the market could see a big surge. The worry is whether it is the last swoosh higher as the Fed starts to bow out of QE and the last money is sucked into stocks. We will see. Something to keep in mind but not something to make you pull away from making money in stocks as the money comes into the market.



Support and resistance

NASDAQ: Closed at 3587.61

Resistance:
3621 is the upper channel line for the November 2012 to present uptrend. Being tested.

Support:
The 10 day EMA at 3566
3532 is the May intraday high
3530 is the November 2012 up trendline
3521 is the August 2000 low.
3502 is the May 2013 closing high
The 50 day EMA at 3455
3295 is the June 2013 low selloff
The 2011 up trendline at 3293
3227 is the April 2000 intraday low
The 200 day SMA at 3209
3197 is the September 2012 post-bear market high
3171 is the October intraday high
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
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


S&P 500: Closed at 1692.09

Resistance:
The November up trendline at 1693

Support:
1687 is the May high and post-bear market high
The 10 day EMA at 1671
1654 is the June 2013 peak
The 50 day EMA at 1633
1576 from October 2007, the prior all-time high
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
The 200 day SMA at 1525
1499 from January 2008
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


Dow: Closed at 15,528.71

Resistance:
The November up trendline at 15,727

Support:
15,542 is the May 2013 intraday high
The 10 day EMA at 15,404
15,318 is the June closing high
The 50 day EMA at 15,119
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff
14,198 from the October 2007 high
14,149 is the February 2013 high
The 200 day SMA at 14,130
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
13,784 is the late February 2013 closing low
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


Economic Calendar

July 22 - Monday
Existing Home Sales, June (10:00): 5.28M expected, 5.18M prior

July 23 - Tuesday
FHFA Housing Price Index, May (9:00): 0.7% prior

July 24 - Wednesday
MBA Mortgage Index, 07/20 (7:00)
New Home Sales, June (10:00): 481K expected, 476K prior
Crude Inventories, 07/20 (10:30): -6.902M prior

July 25 - Thursday
Initial Claims, 07/20 (8:30): 328K expected, 334K prior
Continuing Claims, 07/13 (8:30): 2990K expected, 3114K prior
Durable Orders, June (8:30): 1.5% expected, 3.7% prior (revised from 3.6%)
Durable Goods -ex transports, June (8:30): 0.4% expected, 0.5% prior (revised from 0.7%)
Natural Gas Inventories, 07/20 (10:30): 58 bcf prior

July 26 - Friday
Michigan Sentiment - Final, July (9:55): 84.2 expected, 83.9 prior

By: Jon Johnson, Editor
Copyright 2013 | 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

It's Earnings Season

MARKET SUMMARY

- Jobs report beats, revisions solid, but futures fell on the news: taper reality.
- ECB states it is ready to continue its policies forever. Futures jump, dollar surges.
- 'No doubt' jobs market is in recovery say some, but a surge in part-time jobs is hardly a victory as the structural jobs change becomes entrenched.
- Dollar surging, Oil surging, Bonds tanking, Gold dives but holds 1200.
- It's earnings season. And all that implies.

Stocks rally, but hard to tell if it was jobs or the ECB.

Lots of excitement about a jobs report that was good on numbers, bad on quality, and ugly on those wanting fulltime work, but not finding it.


The Ugly The Good The Bad

The Good: 195K June jobs. May revised: 195K from 175K. April: 199K from 149K

The Bad: 360K part-time jobs (557K YTD) for 28.059M total, an all-time high. -240K fulltime jobs (just 130K YTD). ONLY 47% OF US CITIZENS HAVE FULL-TIME JOBS!

The Ugly: U6 (underemployed due to economic conditions) 14.3M from 13.8M in May.

Household Survey:

Unemployment: 7.6% versus 7.6% expected versus 7.6% May. Longest stretch of 7.5+% unemployment (54 months) since record keeping started in 1948!
Participation Rate: 63.5% versus 63.4%
Household jobs gained: 160,000.
Manufacturing jobs fell for the fourth straight month. Only +13K YTD
Restaurants and Bars: +51.7K, +239K YTD. 10,339,800 current, an all-time high.

Non-Farms Report Internals:
Restaurants +37K
Leisure and hospitality: +75K
Education, Health, Temporary: +23K
Manufacturing -6K




What does this show? The continued surge in part-time hiring that was ignored until last month's jobs report when the Wall Street Journal and others finally picked up on the argument we made for months, i.e. the jobs quality was bad because companies were hiring to minimize costs ahead of the full implementation of the Affordable Healthcare Act.

I suppose the President will now want to amend the legislation to lower the hours to 25 per week in order to avoid the impacts, but that doesn't matter now that the employer applicability was put off until 2015, once again conveniently avoiding showing just how onerous, unworkable, and expensive the legislation will be until after a national election.

The conclusion: get used to it. Too many regulations on those who would create new companies and new jobs here in the US, so the bulk of jobs created will be at the lower end . . . just as what has transpired the past several months.

ECB has more of an impact on US stocks.

But did jobs make the difference for stocks? It was clear early on that was not the case. Futures were up on the ECB's pronouncement on July 4 that it would maintain its easy policy for a long time to come, scrapping its 'we don't give no stinking guidance' positions. Draghi last year said he would do anything, and he has augmented that to do anything forever.

Futures loved the ECB stance. Futures jumped early. Jobs hit, they dipped. It was not until an hour into the session that they found their footing and rallied, more or less steadily, into the close.

SP500 16.48, 1.02%
NASDAQ 35.71, 1.04%
DJ30 147.29, 0.98%
SP400 1.26%
RUTX 1.44%
SOX 1.35%

Why no jump on the jobs report? Perhaps the headline numbers were too strong for those worrying about a taper. Perhaps stocks saw through the raw numbers and looked at the number of part-time and the number of underemployed seeking fulltime work and figured the taper might be less likely. What IS less likely is those in the latter camp getting what they want. The Fed is going to taper starting in September.

In the end it didn't seem to matter. Stocks rallied, albeit on low volume, with SP500 and other indices clearing some resistance. Not bad ahead of a weekend with plenty of geopolitical intrigue.


CHARTS:

SP500 played with the 50 day SMA all session, breaking it, giving it up, but then breaking above it for good as stocks jumped to session highs in the last 45 minutes of trade. Clearing this type of resistance is always a process, but the move was solid on rising, albeit still low volume (holiday, right?), closing out at session highs.

DJ30 broke its 50 day SMA as well, bouncing off a four day lateral move. Not bad.

NASDAQ gapped, filled the gap and then closed at the session high, just below the November trendline. NASDAQ is through the June gap and looks solid as it continues its two week recovery.

RUTX moved to a new all-time closing high, also filling its gap early and then recovering.

SOX moved through its 2011 peak and is now looking at the mid-June high again.



Leadership

As interest rates rise, there are definite impacts on several sectors.

Internet stocks are still strong: WWWW, GOOG. AWAY remains in good shape to move after a short pullback.

Housing is hit but it is setting up for a relief move: DHI, TOL, PHM

Banks are jumping: JPM broke higher. STT is up and running along with many regional banks.


OTHER MARKETS
Dollar surging even more: 1.2830 versus 1.2976 euro. The dollar index has now cleared the May peak as the ECB commits to forever liquidity and the US posts 'strong' jobs.

Bonds: 2.71% versus 2.50%. Bonds imploded and rates took off. The TLT gapped below the June low. Rates are surging.

Oil continues its run: 103.22, +1.98. Breaking through the top of the old range. US jobs, Egyptian violence worsening (10 dead, over 280 injured, surely more to come).

Gold down hard again: 1212.50, -39.40. After bouncing up to the 10 day EMA, gold rolled over Friday. It held over 1200 and that was noted as a positive. That means little, however, without a bounce off of that level.


MARKETS:

TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: +35.71 points (+1.04%) to close at 3479.38
Volume: 1.242B (+32.83%)

Up Volume: 872.11M (+341.85M)
Down Volume: 362.34M (-20.45M)

A/D and Hi/Lo: Advancers led 2.71 to 1
Previous Session: Advancers led 1.27 to 1

New Highs: 310 (+200)
New Lows: 30 (+13)

S&P
Stats: +16.48 points (+1.02%) to close at 1631.89
NYSE Volume: 571M (+18.46%)

A/D and Hi/Lo: Advancers led 1.16 to 1
Previous Session: Decliners led 1.47 to 1

New Highs: 263 (+186)
New Lows: 207 (+92)


DJ30
Stats: +147.29 points (+0.98%) to close at 15135.84



SENTIMENT INDICATORS

VIX: 14.89; -1.31
VXN: 14.91; -0.89
VXO: 14.62; -1.56

Put/Call Ratio (CBOE): 0.97; -0.17


Bulls and Bears:

Well, it looks as if the convergence that was the most since November 2012 is over. Bulls and Bears looked at each other to end June, gave each other the cold shoulder and bounced back. Bulls pretty solid, bears a big decline with a 4.2 point drop. Looks as if they got their upside impetus as the indices bounced right back up. The Fed taper concerns did not make a difference this time around as the prior readings helped bounce the market.



Bulls: 43.8% versus 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 20.8% versus 25.0% versus 21.9% versus 22.9% versus 20.8% versus 19.8% versus 19.8% versus 19.8% versus 18.8% versus 19.6% versus 20.6% versus 20.6% versus 19.4% versus 19.6% versus 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%.

Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.




MONDAY

Back from the holiday and a clearer read on the market's direction. Wednesday and Friday were not bad days as the indices broke higher with some clearing resistance, e.g. SOX, SP500, DJ30. Held the gains off the recovery bounce, and are now attempting to extend them.

The key remains the leadership, and while some interest sensitive negative sectors are getting hit (e.g. housing), many other sectors look quite solid, and it just so happens they still have some good-looking buys in the ready position. We, of course, will be looking at those in the coming week.

To end the week we let most positions run as there were some soaring positions we didn't want to get in front of e.g. WWWW, CLDX, but did take some gain on the SSO as it hit the target; sticking to the plan. Others look ready to break, e.g. NFLX. Again, there are stocks from several sectors that look ready to roll for next week, and if the market continues this upside break as bonds fade, well, we will participate.

That doesn't mean concerns about the Fed killing the rally are gone from my market outlook. I still think the market likely tops given the Fed withdrawing the stimulus that the overall weak economy uses to limp along, but for now the money is still buying stocks, apparently for lack of any other alternatives. As long as that money is pushed into stocks then we will play the leaders as they make their moves.

Of course there is always a rub. That would be earnings season, and all that implies.


Bud: What does your daddy do?
Pamela: Daddy does oil and all that that implies. 'Urban Cowboy' 1980

It is something of an enigma that stocks continue to rise even on relatively poor earnings growth the past two quarters, i.e. bottom line beats on cost adjustments while posting top line misses. From the headlines it appears this season is not expected to be any different.

The question is, how long can stocks rise on the bottom line beats if the realization is the Fed is going to withdraw stimulus and companies fail to post top line beats this quarter? We will see soon enough as the market gets the 'gist' of the season in a couple of weeks.

With earnings that means even with leaders in good technical position, plays may entail the additional earnings risk. We typically try to avoid plays with earnings close, but also recognize that a good pattern can yield a pre-earnings run as well. Thus you don't avoid plays near earnings, you just need a clear understanding as to why you are in the play.



Support and resistance

NASDAQ: Closed at 3479.38

Resistance:
3486 is the November 2012 up trendline
3521 is the August 2000 low.
3532 is the early May high and 2013 high
3578 is the upper channel line for the November 2012 to present uptrend

Support:
The 50 day EMA at 3396
3295 is the June 2013 low selloff
The 2011 up trendline at 3275
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
The 200 day SMA at 3188
3171 is the October intraday high
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
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
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



S&P 500: Closed at 1631.89

Resistance:
1654 is the June 2013 peak
The November up trendline at 1675
1687 is the May high and post-bear market high
1762 is the upper trendline in the channel

Support:
The 50 day SMA 1626
The 50 day EMA at 1612
1576 from October 2007, the prior all-time high
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
The 200 day SMA at 1514
1499 from January 2008
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
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


Dow: Closed at 15,135.84

Resistance:
The 50 day SMA at 15,072
The November up trendline at 15,540
15,542 is the May 2013 high

Support:
The 50 day EMA at 14,965
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff
14,198 from the October 2007 high
14,149 is the February 2013 high
The 200 day SMA at 14,035
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
13,784 is the late February 2013 closing low
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
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


Economic Calendar

July 1 - Monday
ISM Index, June (10:00): 50.9 actual versus 50.5 expected, 49.0 prior
Construction Spending, May (10:00): 0.5% actual versus 0.5% expected, 0.1% prior (revised from 0.4%)

July 2 - Tuesday
Factory Orders, May (10:00): 2.1% actual versus 2.0% expected, 1.3% prior (revised from 1.0%)
Auto Sales, June (14:00): 5.3M prior
Truck Sales, June (14:00): 6.8M prior

July 3 - Wednesday
MBA Mortgage Index, 06/29 (7:00): -11.7% actual versus -3.0% prior
Challenger Job Cuts, June (7:30): 4.8% actual versus -41.2% prior
ADP Employment Change, June (8:15): 188K actual versus 150K expected, 134K prior (revised from 135K)
Initial Claims, 06/29 (8:30): 343K actual versus 348K expected, 348K prior (revised from 346K)
Trade Balance, May (8:30): -$40.8B expected, -$40.3B prior
Continuing Claims, 06/15 (8:30): 2933K actual versus 2955K expected, 2987K prior (revised from 2965K)
Trade Balance, May (8:30): -$45.0B actual versus -$40.8B expected, -$40.1B prior (revised from -$40.3B)
ISM Services, June (10:00): 52.2 actual versus 54.0 expected, 53.7 prior
Crude Inventories, 06/29 (10:30): -10.347M actual versus 0.018M prior
Natural Gas Inventories, 06/29 (24:00): 72 bcf actual versus 95 bcf prior
Initial Claims, 06/29 (8:30): 343K actual versus 348K expected, 348K prior (revised from 346K)
Continuing Claims, 06/15 (8:30): 2955K expected, 2965K prior

July 5 - Friday
Initial Claims, 06/29 (8:30): 348K expected, 346K prior
Continuing Claims, 06/15 (8:30): 2955K expected, 2965K prior
Nonfarm Payrolls, June (8:30): 195K actual versus 166K expected, 195K prior (revised from 175K)
Nonfarm Private Payrolls, June (8:30): 202K actual versus 180K expected, 207K prior (revised from 178K)
Unemployment Rate, June (8:30): 7.6% actual versus 7.6% expected, 7.6% prior
Hourly Earnings, June (8:30): 0.4% actual versus 0.2% expected, 0.1% prior (revised from 0.0%)
Average Workweek, June (8:30): 34.5 actual versus 34.5 expected, 34.5 prior


July 8 - Monday
Consumer Credit, May (15:00): $13.2B expected, $11.1B prior

July 10 - Wednesday
MBA Mortgage Index, 07/06 (7:00): -11.7% prior
Wholesale Inventories, May (10:00): 0.3% expected, 0.2% prior
Crude Inventories, 07/06 (10:30): -10.347M prior
FOMC Minutes, 6/19 (14:00)

July 11 - Thursday
Initial Claims, 07/06 (8:30): 345K expected, 343K prior
Continuing Claims, 06/29 (8:30): 2949K expected, 2933K prior
Export Prices ex-agriculture, June (8:30): -0.7% prior
Import Prices ex-oil, June (8:30): -0.3% prior
Natural Gas Inventories, 07/06 (10:30): 72 bcf prior
Treasury Budget, June (14:00): -$59.7B prior

July 12 - Friday
PPI, June (8:30): 0.3% expected, 0.5% prior
Core PPI, June (8:30): 0.1% expected, 0.1% prior
Michigan Sentiment, July Preliminary (9:55): 84.8 expected, 84.1 prior

By: Jon Johnson, Editor
Copyright 2013 | 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

A Day of Rest as Indices Bumped Next Resistance

MARKET SUMMARY

- Even more Fed-speak, taper appears clearer as market ponders whether the Fed still has its back.
- A day of rest as expected as indices bump next resistance, first test in the recovery attempt.
- China up to end the week, trying to mask growing bad loan and banking problems.
- Chicago PMI hangs onto expansion but posts a precipitous drop from a likely outrider month.
- Michigan Sentiment June Final jumps expectations as hope in the US still springs eternal.
- Important week for the market is highlighted by Independence Day holiday on Thursday and Jobs report Friday.

After three days the market takes a pause at resistance.

Pretty much as expected. After three days of a solid rebound the stock indices started negative, but it took a morning fade in futures from positive in order for the rally to stall. Futures were up, looking pretty good as the rest of the world was not imploding. China actually rebounded 1.7%, a mere pittance given the precipitous decline the prior week. A bit of a bounce a la the US markets? Perhaps, but the new story from China are the bad loans that are pushing yield spreads wider and wider, no small issue for China's financial situation. If you don't think so, recall a little bad loan issue in the US back in 2007 and 2008?

Then there was the negative news. Earnings were not good. BBRY bombed results, missing expected unit sales by 800K. NKE beat the bottom line but suffered just in line top line sales revenues. BBRY was crushed; NKE enjoyed a nice gain after an early hammering on the results.

Funny thing. Earnings, the lifeblood of the stock market, were not the real story on the day. Q2 wrapped on Friday and earnings will be flowing big time in a couple of weeks in a quarter that is hoped to be over 3% GDP-wise.


No, for now the real story that drives the market is the Mr. Bernanke, the FOMC members, and what the parrot saw.


Radar: Your films came from the Tabasco Film Company in Havana, Cuba.
Henry: Tee-riff! Great, great. Yvonne, Renee and Loretta in 'What the Parrot Saw.'
Radar: What's to other one say, sir?
Henry: Uh . . . Renee, Loretta and the parrot in 'What Yvonne Saw.'

All week investors were peppered with Fed-speak, trying to explain the FOMC statement and Mr. Bernanke's text to the press following the meeting. Friday Bernanke oversaw the next round of commentary, pulling in some new faces, recycling some others from prior in the week.

Mr. Stein of the Fed fraternity came out pre-market with his take on the FOMC statement and the Fed's course of action. Mr. Stein talked the same we could do this, we could do that blather heard all week, more of the same. Then he used an example of say, perhaps starting the taper in September because the Fed isn't focusing on the last few weeks of data ahead of any FOMC meeting, but the data 'SINCE THE INCEPTION OF THE PROGRAM,' i.e. since QE started. One supposes that means since things are substantially better now than then, the Fed can start pulling back.

Okay, thanks. Apparently the market took it that way. Futures that were up were no longer up by the time the opening bell rang. They rolled over with Dow futures off over 60 points by the open.


Manufacturing data not up to snuff but Sentiment continues to hope higher.

Stocks opened and sold. At the top of the first hour Chicago PMI came in at 51.6, still above the 50 threshold level of contraction/expansion, but missing expectations of 55.5 and plummeting from 58.7 in May. Biggest month to month decline in 4 years.


Trying to break the downtrend but struggling after a double top spanning 2003 and 2010 peaks.



Note Unfilled Orders suffered the largest month to month decline since March 1974, falling to 34.4 from 53.1. Of course, it is not shown on this chart but is critical as it means production likely continues to decline from the May peak.

New Orders will need to increase in order to keep the production level and the index in expansion.

Of concern is the jump back higher in Prices Paid close to 60 yet again after a two-month hiatus.


Michigan Sentiment Final managed to pull the market's castanets out of the fire.

Michigan Sentiment, June Final (9:55): 84.1 actual versus 82.7 expected, 84.5 May


Audacity of hope? Expectations continue to lag present conditions.

Hope for a better tomorrow continues. Americans are optimistic by nature. They always hope for a better future for themselves and their children. That economic data that is not tanking (though is pathetic by US historical standards; hope they are not only historical now) is helping hope flourish. Hope, as Andy Dufresne said in 'Shawshank Redemption,' is a good thing.



Yes, when it is realistic hope. Not to be confused with 'hope and change.' Hope so often rhymes with dope, and this Fed liquidity induced recovery might not make it if the Fed peels back the monthly mainlining. Compared to massive buying each month, backing off the buys but keeping a big balance sheet is like substituting pure gasoline not with an ethanol blend, but with Kool-Aid and thinking the vehicle can still run.

Hey, but it all worked for the market. After the dip into the news it seems a Chicago PMI that was at least above 50 no matter what land speed records it set on the drop from the prior month and a 'surely it has to get better than this so let's look ahead to that time' sentiment surge were all the market needed to move back up.

Stocks recovered and rallied into midmorning, held a test over lunch, then legged it higher into the last hour. All looked good heading into the Russell rebalance, but the buy and sell orders on close didn't match up as the sells outnumbered the buys. The resultant fairly precipitous decline pushed SP500 and DJ30 negative on the session.

SP500


Disappointing? Not really. We were not expecting any upside. Indeed, the market gave exactly what we were looking for: a pause, a rest, a shakeout and recovery - - call it what you want - - after three solid upside rebound sessions took the indices to next resistance. Some queried if this action represented an exhaustion gap given SP500 and NASDAQ both gapped to the upside Tuesday through Thursday. It can be viewed as that, but likely only for this short move. Bigger picture SP500 is in a pretty nice ABCD test to the 38% Fibonacci retracement of the run from November to May. That suggests there is still a lot of momentum in the move.

More Fed-Speak: Lacker's reprise

It has the momentum; the question is whether it is enough to overcome the tightening noose of Fed action?

Friday the FOMC designated dissenter (DD) Lacker was talking again. This is Lacker's second public pronouncement of the week on the meaning of the FOMC's position since the statement's release. Wednesday Lacker sounded much more dovish and was branded a faux-dove but really didn't change his stance: he said there would be no change in rates for a long time and made no mention of QE tapering. Lacker bristled at the characterization and came out in defense of his hawk reputation Friday, warning investors to get used to 'falling markets' as they should not be too surprising. Also, prepare for more volatility as the Fed acts over the coming quarters, dropping bits of 'insight' into its policies. That doesn't sound so transparent.


I bet this fools them that I am really transparent.

In the end, the Fed-speak to clarify the Fed-speak appeared to conflict itself, leaving many to pine for the days when the Fed didn't try to be so transparent. Now it seems that the words its members utter look like rather transparent attempts to manipulate responses to their supposedly transparent statements.

Through it all the speak can be distilled to this: Taper to start in September. No touching interest rates for a long time. Don't have to; the market is pushing them up on its own. Keeping the balance sheet huge, but now the Fed wonders if just keeping the balance sheet really does control interest rates as Keynes felt (wrongly so as reality is showing).

Again I pose the question asked often of late: If the Fed pulls the QE in part over time, will the economy and thus the market manage to move higher? Heck, will they even manage to hold what they have gained thus far? Bernanke said he wanted to inflate asset prices to bring about a wealth effect. If they were inflated with QE and QE is pared back without economic growth outside what QE creates, it is axiomatic that values fall when the force driving them higher is removed or lessened.

Fed is on taper trail. Fed warns markets will fall. Is that now or later?

In short, if you take away the thing that made stock prices rise and nothing has changed economically, stock prices will fall. Hence Lacker's warning: 'Falling markets should not be too surprising.' They say don't fight the Fed. Lacker is telling you what is going to happen.

The next question is: does it happen now or later? The market sold after taper was mentioned again and it sold hard when the FOMC appeared to inscribe it into the stone of its statement. If the market synthesizes all of the Fed-speak into a belief taper is coming, then the move is likely over, at least to the straight higher, 45 degree incline in stocks as demonstrated in the November to May most recent run. I said when the FOMC came out with its statement and Bernanke's comments that the market had topped. That is a conclusion based upon a familiarity with how the market reacts vis- -vis Fed actions.

But you have to stay open, not biasing your views particularly your actions, based upon just your own views. As pointed out the past week, there are technical reasons the market can continue higher, namely the ABCD pattern at the 38% Fibonacci retracement on SP500.

This test after the 3-day bounce will tell much of the tale as to the 'when' the market will start to factor a taper into prices. It just may be that there is enough hope out there as shown in Michigan Sentiment and Consumer Confidence to keep the technical recovery moving. Unless that hope is backed up by some seriously improving economics (and not just the marginal BS the economy is showing still), any further upside move ultimately falls victim to the Fed's impending taper.


MARKETS:

TECHNICAL SUMMARY

INTERNALS

NASDAQ
Stats: +1.38 points (+0.04%) to close at 3403.25
Volume: 2.514B (+49.31%)

Up Volume: 1.74B (+440M)
Down Volume: 1.83B (+1.461B)

A/D and Hi/Lo: Advancers led 1.02 to 1
Previous Session: Advancers led 3.47 to 1

New Highs: 145 (+21)
New Lows: 38 (+5)

S&P
Stats: -6.92 points (-0.43%) to close at 1606.28
NYSE Volume: 863M (+32.36%)

A/D and Hi/Lo: Advancers led 1.04 to 1
Previous Session: Advancers led 4.77 to 1

New Highs: 123 (+12)
New Lows: 113 (-3)

DJ30
Stats: -114.89 points (-0.76%) to close at 14909.6


CHARTS

SP500 & DJ30: Still almost identical patterns with SP500 again bumping the B point in the ABCD pattern as well as the 50 day SMA and EMA as on Thursday. Unlike Thursday, the indices slipped back to a modest loss. Huge volume, but a rebalance day. Taking the rest we anticipated, and the resolution is key. If the Fed was not now in taper mode I would say the upside had the higher probability of winning out.

NASDAQ: Extended the move but struggled to do so. Gapped lower, recovered through the 50 day SMA, but could not stick the landing. NASDAQ remains at the lower gap point from two weeks back, basically struggling at the same level as SP500. It is also battling something of an island reversal from the gap higher in early May then that gap lower two weeks back. That makes this an extremely important test as well.

RUTX: The small caps paused with a doji at the lower gap point from a couple weeks back. The small caps look better than NASDAQ frankly.

SOX: Up on Friday as it is another index bumping into the gap point from two weeks back. Moved into the gap zone for the second session and then faded, but is holding easily in the range, now moving into the upper half. A very volatile, choppy pattern with a breakout then failure, a breakdown with no follow through, and now back right in the middle. Wild action but it has held the line.


SENTIMENT INDICATORS

VIX: 16.86; 0
VXN: 16.47; -0.25
VXO: 17.24; +0.54

Put/Call Ratio (CBOE): 0.96; -0.06

Bulls and Bears:

The decline from two weeks back caught up with investor confidence two week's back. After rallying the prior week into the teeth of the selling, bulls hit their lowest level since December 2012. Bears hit their highest since January. As such, this indicator is at levels that would produce upside rallies in prior points during the November run. Hate to say it, but this time it could be different given there are now doubts the Fed has the market's back. Thus this indicator may need to get to more traditional levels, e.g. less than 35% for bulls and over 35% for bears.



Bulls: 41.7% versus 46.8% versus 43.8% versus 45.8% versus 52.1% versus 54.2% versus 52.1% versus 47.9% versus 44.3% versus 47.4% versus 50.5%.

Background: Undercut 35%, the threshold for bullishness, in early June. As noted, hit 34% in early June. It did its job and the market is on the rally. Hard drop to 34 from 39.3% as economic reality and a choppy stock market hit. Off the 55+ level hit in late February. That was the highest level since April and May of 2011, the peak of the post-bear market high. 35% is the threshold level suggesting bullishness. To be seriously bearish it needs to get up to the 60% to 65% level.

Bears: 25.0% versus 21.9% versus 22.9% versus 20.8% versus 19.8% versus 19.8% versus 19.8% versus 18.8% versus 19.6% versus 20.6% versus 20.6% versus 19.4% versus 19.6% versus 18.6% versus 18.8% versus 21.1% versus 21.1% versus 22.1% versus 21.1% versus 21.1% versus 22.3% versus 22.3% versus 23.4% versus 24.5% versus 24.5% versus 23.4% versus 25.5% versus 27.7% versus 27.7% versus 28.7% versus 27.7%.

Summary: Over 35% is the threshold to be really be a good upside indicator. For reference, bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment. Prior levels for comparison: Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). That was a huge turn, unlike any seen in recent history.


THIS WEEK

An Independence Day shortened week has the market closing at 1:00ET Wednesday and all day Thursday. NYSE rules say it cannot be closed 4 days in a row so Friday the market will be open. No big event typically, but this one has the Jobs Report, and that is enough to get some traders hanging around. Not many, but some.

Midsummer, 1.5 day holiday midweek and that typically equals light volume. Light volume can mean more volatile conditions as a few can push the market a lot. Then when the High Frequency programs get going it can gyrate like a young Elvis.



Time to keep the eyes on the big picture then, and that means SP500 testing the resistance at the B point and 50 day SMA and NASDAQ at the 50 day EMA as well. The rebound was solid in price and breadth, a bit light on trade. Technically just fine in terms of the larger pattern, the ABCD at the 38% Fibonacci retracement.

Of course the market is also dominated by the Fed, and the reverberations of the deluge of comments the past two weeks are still working through stocks.

Those are the two tensions in the stock market: a still solid technical setup longer term versus the impact on the economy and thus earnings of a Fed taper. Perhaps this week will tell the story, but the holiday makes it more problematic.

We have some nice upside positions in place, some nice potential upside plays on one side. We have some nice downside positions in place, some nice potential downside plays on the other. We made money both ways this past week. Likely that won't continues as well as it has, however, because the market is going to make a decision at this key level. When it does, we go with the decision of M and use it to make money.

I said that a test at this level would allow some solid stocks to set up new buys. Those will be key to watch this week because as always the leaders lead, and if they test then blast off again, the market follows. If they test then roll over, as a group of course, the market follows.


Support and resistance

NASDAQ: Closed at 3403.25

Resistance:
The 50 day SMA at 3404
3470 is the November 2012 up trendline
3521 is the August 2000 low.
3532 is the early May high and 2013 high
3560 is the upper channel line for the November 2012 to present uptrend

Support:
The 50 day EMA at 3387
3371 is the early May 2013 upper gap point
3321 from April 2000
3295 is the June 2013 low selloff
The 2011 up trendline at 3265
3227 is the April 2000 intraday low
3197 is the September 2012 post-bear market high
The 200 day SMA at 3182
3171 is the October intraday high
3134 is the March 2012 post-bear market peak
3130 from some January 2013 lows
3104-3112 from August and mid-October peaks.
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
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



S&P 500: Closed at 1606.28

Resistance:
The 50 day EMA at 1611
The 50 day SMA 1622
The November up trendline at 1663
1687 is the May high and post-bear market high
1738 is the upper trendline in the channel

Support:
1576 from October 2007, the prior all-time high
1569.48 is the 78% Fibonacci retracement of the April to May 2013 run
1560 is the June 2013 reversal low
1556 from July 2007
1541 is the April 2013 closing low in that pullback inside the uptrend
1539 from June 2007
1531 is the recent high
The 200 day SMA at 1510
1499 from January 2008
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
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


Dow: Closed at 14,909.60

Resistance:
The 50 day EMA at 14,957
The 50 day SMA at 15,042
The November up trendline at 15,455
15,542 is the May 2013 high

Support:
14,888 is the April peak and prior all-time high
14,844 is the June intraday low
14,551 is the June 2013 intraday low on the selloff
14,198 from the October 2007 high
14,149 is the February 2013 high
14,022 from 7-07 peak
14,010 from the early February 2013 consolidation
The 200 day SMA at 14,004
13,784 is the late February 2013 closing low
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
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


Economic Calendar

June 25 - Tuesday
Durable Orders, May (8:30): 3.6% actual versus 3.0% expected, 3.6% prior (revised from 3.5%)
Durable Goods -ex transports, May (8:30): 0.7% actual versus -0.5% expected, 1.7% prior (revised from 1.5%)
Case-Shiller 20-city, April (9:00): 12.1% actual versus 10.5% expected, 10.9% prior
FHFA Housing Price Index, April (9:00): 0.7% actual versus 1.5% prior (revised from 1.3%)
Consumer Confidence, June (10:00): 81.4 actual versus 75.0 expected, 74.3 prior (revised from 76.2)
New Home Sales, May (10:00): 476K actual versus 460K expected, 466K prior (revised from 454K)

June 26 - Wednesday
MBA Mortgage Index, 06/22 (7:00): -3.3% prior
GDP - Third Estimate, Q1 (8:30): 1.77% versus 2.4% expected, 0.4% Q4
GDP Deflator - Third, Q1 (8:30): 1.1% expected, 1.1% prior
Crude Inventories, 06/22 (10:30): 0.313M prior

June 27 - Thursday
Initial Claims, 06/22 (8:30): 346K actual versus 345K expected, 355K prior (revised from 354K)
Continuing Claims, 06/15 (8:30): 2965K actual versus 2958K expected, 2966K prior (revised from 2951K)
Personal Income, May (8:30): 0.5% actual versus 0.2% expected, 0.1% prior (revised from 0.0%)
Personal Spending, May (8:30): 0.3% actual versus 0.4% expected, -0.3% prior (revised from -0.2%)
PCE Prices - Core, May (8:30): 0.1% actual versus 0.1% expected, 0.0% prior
Pending Home Sales, May (10:00): 6.7% actual versus 1.5% expected, -0.5% prior (revised from 0.3%)
Natural Gas Inventories, 06/22 (10:30): 95 bcf actual versus 91 bcf prior

June 28 - Friday
Chicago PMI, June (9:45): 51.6 actual versus 55.5 expected, 58.7 prior
Michigan Sentiment - Final, June (9:55): 84.1 actual versus 82.7 expected, 82.7 prior


July 1 - Monday
ISM Index, June (10:00): 50.5 expected, 49.0 prior
Construction Spending, May (10:00): 0.5% expected, 0.4% prior

July 2 - Tuesday
Factory Orders, May (10:00): 2.0% expected, 1.0% prior
Auto Sales, June (14:00): 5.3M prior
Truck Sales, June (14:00): 6.8M prior

July 3 - Wednesday
MBA Mortgage Index, 06/29 (7:00): -3.0% prior
Challenger Job Cuts, June (7:30): -41.2% prior
ADP Employment Change, June (8:15): 150K expected, 135K prior
Initial Claims, 06/29 (8:30): 348K expected, 346K prior
Trade Balance, May (8:30): -$40.8B expected, -$40.3B prior
Continuing Claims, 06/15 (8:30): 2955K expected, 2965K prior
Trade Balance, May (8:30): -$40.8B expected, -$40.3B prior
ISM Services, June (10:00): 54.0 expected, 53.7 prior
Crude Inventories, 06/29 (10:30): 0.018M prior
Natural Gas Inventories, 06/29 (24:00): 95 bcf prior

July 5 - Friday
Initial Claims, 06/29 (8:30): 348K expected, 346K prior
Continuing Claims, 06/15 (8:30): 2955K expected, 2965K prior
Nonfarm Payrolls, June (8:30): 165K expected, 175K prior
Nonfarm Private Payrolls, June (8:30): 179K expected, 178K prior
Unemployment Rate, June (8:30): 7.6% expected, 7.6% prior
Hourly Earnings, June (8:30): 0.2% expected, 0.0% prior
Average Workweek, June (8:30): 34.5 expected, 34.5 prior
Natural Gas Inventories, 06/29 (10:30)

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

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

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