The popularity of day-trading has been exponentially increased by the unemployed workers who can not find a job in today’s job-market. This is an interesting concept and should act to swell the commissions for such firms as InteractiveBrokers.com, MFGlobal, FCStone, MBF Clearing, E-Trade, etc. The discount commission houses will, along with some clearing firms, make these “no risk” profits. So, if you are looking for a nitch market to invest in, why not look to these firms or the public exchanges. The flow of the unemployed into day-trading should swell the current intraday volumes. It seems that the futures arena, the CME, will be the ideal place for a day-trader to focus. The market in the E-mini’s is very liquid and very accessible. As to stocks, day-trading in that arena will also flourish although; the professional day-trader-scalper will find his way to the futures arena, that is as long as its preferred tax status remains.
We further see an influx into students seeking to obtain degrees to enhance their resumes. While expanding education will always benefit the student in today’s market, we do not see this as a shoe-in for a job. Many of the recent college grads, and indeed last year’s college graduates, remain unemployed. These college graduates do not move out of their childhood homes to bring fresh blood and money to the economy, but rather are bound to their childhood homes and remain tethered to their parents. As a result, the parents, who are only too happy to have their children close by, have had to put off notions of retirement or of slowing down. The empty nesters find that their nests are again full.
This week marks the end of the second quarter. Further, we have a FOMC meeting which, these days, offers no surprises to the markets. We will have an upside bias into these events.
Tuesday: May existing home sales are released at 10:00, May equipment leasing and finance index is released at 10:00. Wednesday: May durable goods are released at 8:30, May new single family home sales are released at 10:00, and FOMC releases is interest rate decision along with a statement at 2:15. Thursday: Federal Reserve Chairman Bernanke testifies regarding the Bank of America-Merrill takeover and 1st quarter GDP is released. Friday: May personal income and consumption are released at 8:30, June Michigan Sentiment is released between 9:45 and 10:00 and Dallas Federal Reserve President Fisher speaks.
The US dollar index seems to be coiling with a resolution of that coil expected on Wednesday. When reviewing the candlestick chart, the point and figure chart and the market profile chart we get the same message; the market is consolidating with a resolution expected within several days. To turn this chart positively we need to see a close above 81.50 and a rally to 82.00. For the bears to win this battle, we would need to see the market drop and close below 79. The 5 day moving average is at 80.98. The top of the Bollinger band is at 81.773 and the lower edge is seen at 79.268. The stochastic indicator, the RSI and our own indicator are all pointing lower, issuing a solid continued sell-signal. The Thomas DeMark Expert indicator is going sideways. The weekly chart show that this market is trying to defend the recent bottom and could, in fact, be forming a decent bottom. We find the chart below the Ichimuko clouds for the daily time-frame, in the clouds for the weekly time-frame and below the clouds for the monthly time-frame.
The S&P 500 ended the Friday session with a positive close as options on equities expired. The morning expiration of the futures contract inspired a bit more of a lift that was seen at the close. So long as the market remains above 909 and more importantly 899.25, we think this could be a short term bottoming process. Naturally, we need to see a close above the Friday’s high of 923 to open the door to 938 and 955. The 5-day moving average is at 917.83. The top of the Bollinger band is at 960.59 and the lower edge is seen at 885.92. The S&P 500 is above the Ichimuko clouds for the daily time-frame. Both the weekly and the monthly charts show that the S&P 500 are below the Ichimuko clouds. The indicators are all issuing a buy-signal on the daily chart. We would expect to see a clear declaration of direction by Wednesday. The Market Profile chart shows that we are in an area where we appear to be fairly priced and in equilibrium. Above 945.60 we should see a quick rally to 975. We also saw a volume surge at the 906.20 to 917.70 level. On the downside a drop below 817 will inspire the bears to press the market to levels in the mid 700’s.
The NASDAQ 100 is out-performing the S&P 500. The Friday session kissed the downtrend line of 1476.75 and the retreated closing the session at 1464. All the indicators that we follow herein are uniformly issuing a continued buy-signal. The 5-day moving average is at 1456.10. The top of the Bollinger band is at 1537.24 and the lower edge is seen at 1372.54. The uptrend is at 1450 for the Monday session and the downtrend line is seen at 1471. We are above the Ichimuko clouds for the daily time-frame and in the clouds for both the weekly and the monthly time-frame. The Market Profile chart shows that above 1512-1517 there is very little resistance until 1728 and then 1824. This market should lead the S&P 500 higher.
The Russell 200 enjoyed a decent rally in the Friday session. This index remains above the uptrend line and below the downtrend line forming a pennant which should resolve by mid Thursday. The downtrend line is at 520.24 and the uptrend line is at 503.08. All the indicators that we follow herein are issuing a continued buy-signal. We are above the Ichimuko clouds for the daily time-frame and in the clouds for the weekly time-frame. We need to see this market close above 554 to really convince us that the rally is “for real” and not just a fake-out. The weekly Market Profile chart is very interesting. This chart clearly shows that there is very little resistance above 566.40 and shows a gap from 585.60 to 614.40. Perhaps the chart is inaccurate but if it isn’t, then once we get to those levels, the market should fly to the upside.
Crude oil looks as though it could retreat further especially if it closes below 68.90. For the chart to reverse and become positive, it needs to close above 72.37. The 5-day moving average is at 70.60. The top of the Bollinger band is at 74.80 and the lower edge is seen at 61.18. The 5-day moving average is at 70.60. The top of the Bollinger band is at 74.80 and the lower edge is seen at 61.18. All the indicators that we follow are issuing a continued sell-signal. We are above the Ichimuko clouds for the daily and monthly time-frame and below the clouds for the weekly time-frame. The downtrend line of 72.37 is also valid on the weekly chart. The weekly chart shows a nicely rounded bottom. Looking at the short-term Market Profile chart is not as helpful as looking at the longer-term charts. The weekly chart quickly illustrates the lack of resistance above 77 to 82-84 and then again above 87 to 95. On the downside, there is plenty of support down to the 43 level.
Gold traded very quietly in the Friday session adding only 1.60. The market looks to be defending the 931 and 926.90 levels. All the indicators that we follow are issuing a continued buy-signal. We are above the Ichimuko clouds for the daily, weekly and monthly time-frame. The 5-day moving average is at 932.70. The top of the Bollinger band is at 987.90 and the lower edge is seen at 922.40. We are in a huge congestion area. The upper edge of that congestion is at 988.20. Above that level, we would expect to see the market fly to the highs without much trouble. On the downside, there are no worries unless you see the market trade below 874-866. Should the market retreat to those levels, expect to see the weak longs run for cover and the market retreat to the 769 area as a first stop lower.