This Wednesday, Alcoa kicks off earnings season. Here is the bottom line; we will now see if there are any “green shoots” and if these shoots are weeds or something of value. We will begin to see if reporting companies forecast a glimmer of hope in the next quarter or, continue to profess gloom and doom. This should be an interesting week, because the S&P 500 September futures contract could break out of its trading band causing investors to either jump in or run for the hills.
Much has been made of the decline in the Thursday trading session after the release of the “June Jobs Data.” In truth, when looking at the chart we just moved to the lower edge of the trading band that the market has been sitting in for the past several weeks. The trading range is from 928.25 to 884.25 on the June S&P 500 futures. Until or unless we break either of these levels we will continue to go sideways and bounce between the upper and the lower levels. The market retreated on very light pre-holiday volume. In the old days, these sorts of pre-holiday trading days were given less importance, but today, with the advent of all electronic all the time trading, we can not discount anything.
The June “Jobs” report couldn’t hide the fact that the economy is not adding jobs. Even the creative birth/death numbers couldn’t make the numbers look better. The good news is that job creation is not going to be a leading indicator but rather will lag any stabilization seen in this economy. Thus the jobless rate will continue even after the economy bottoms. Just think about it this way, if you were a company would you hire full time employees on a hunch that the economy would improve shortly, or would you wait for the orders and then hire part-time people to fill the gap of work needed to be done. Before you even hired part-time workers wouldn’t you expand the work week for the employees that you already have on the books? Why of course you would. Therefore, the jobs report is just showing us what we already know. We are not going to make a “V” bottom, but rather will have an extended bottoming process which, we may or may not be near. It is too soon for that kind of conclusion. What we can say is that the rate of decent is abated and we are declining with less velocity than we did a number of months ago. We can also say that should this slowing of the decline continue, we will near what could be termed a bottom. Does that mean that we are going to go up? No. It means that we have a chance to go up…eventually.
Wednesday: Alcoa begins the earnings parade, and May consumer credit will be released at 3:00. Thursday: May wholesale inventories are released at 10:00, June chain store sales are released and Fed governor Duke speaks. Friday: June import prices are released at 8:30, May international trade deficit is released at 8:30 and July University of Michigan sentiment is released at 9:45-10:00.
The US Dollar index left a doji candle as a result of the Friday session. Please be aware that the
US markets were closed on Friday. The US Dollar index appears to be trading in a channel bounded by 80.737 on the upside and 79.291 on the downside. The 5-day moving average is at 80.315. The top of the Bollinger band is at 81.517 and the lower edge is seen at 79.524. We are 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. We have buy-signals for the daily and the weekly time-frame but continued sell-signals for the monthly time-frame. In doing some very basic Fibonacci work on the weekly chart, we find the 50% retracement line at 83.983 and the 61.8% line at 85.337.
The S&P 500 is stuck in a trading range of 884.25 (which could go as low as 875) and 928.25 on the upside. These numbers are for the June future’s contract no the cash market. The June futures are selling at a discount to cash, which given the interest rate environment is not unusual. The 5-day moving average is at 908.55 and pointing lower. The top of the Bollinger band is at 954.02 and the upper edge is seen at 882.65. We are just above the Ichimuko clouds for the daily chart and below the clouds for both the weekly and the monthly charts. The weekly chart looks as though we are curling over to the downside. So long as we remain above 884.25 we will remain with the bulls. However; should we close below and remain below 875 for two days, we will look for a nasty downdraft. The stochastic and our own indicator are both curling to the upside but have not issued a buy-signal. The RSI is flat, going sideways. The Thomas DeMark Expert indicator is pointing lower. The indicators on the weekly charts are all pointing lower and on the monthly charts, are pointing higher. The market profile chart shows us that we will see a quick move to the upside should the market trade above 901.25 returning the market to 911.25. On the downside, the market will feel pressure below 883.
The NASDAQ 100 remains above the uptrend line of 1436.68 on the daily chart. The trading range for the NASDAQ 100 is 1496.25 to 1412.00. All the indicators that we follow herein are issuing a uniform sell-signal for both the daily chart and the weekly chart with plenty of room to the downside. The only good news we can see is on the daily chart where, both the stochastic indicator and our own indicator have begun to curl to the upside. This in no way assures anything except that perhaps we won’t go much lower on this push to the downside. We would respect the uptrend line and view a violation of that line for at least two days as a signal that the market is going to return to the June low of 1412 and the May low of 1342.75. The 5-day moving average is at 1465.00. The top of the Bollinger band is at 1512.02 and the lower edge is seen at 1422.12. Looking at the chart formation, we are above the Ichimuko Clouds for the daily time-frame, but in the clouds for both the weekly and the monthly time-frames. The daily chart looks as though the NASDAQ 100 were a sine wave which is getting narrower. This can be a coiling formation in process, not yet done. If so, it will have lower highs and higher lows and continue until it is resolved.
The chart of the Russell 2000 looks very much like the chart of the NASDAQ 100. The uptrend line is at 490.15. The downtrend line is at 517.48 a level which needs to be removed to re-establish a bullish bias to this chart. The 5-day moving average is at 504.82. The top of the Bollinger band is at 534.41 and the lower edge is seen at 485.55. The daily chart is above the Ichimuko clouds and the weekly chart is just under the clouds touching the lower edge of the cloud. The Russell 2000 is in a trading range bounded by 518.70 at the upper edge and 485.10 at the lower edge. Naturally a violation of either end (which is confirmed not just a penetration) will lead to the lemming effect, that is schools of investors following the lead or the crowd. The stochastic indicator and our own indicator are curing to the upside but are now where near a buy-signal. The Thomas DeMark Expert indicator is issuing a sell-signal and the RSI is going flat. There it is analysis for every liking. When this sort of thing occurs, it is prudent to respect the trendlines and live on the sidelines.
Crude Oil has broken the uptrend and continues to waterfall to the downside. We can project from the chart pattern that $60 is a good possibility. The indicators that we follow continue to issue a sell-signal at oversold levels. We are above the Ichimuko clouds for both the daily and the monthly time-frame but below the clouds for the weekly time-frame. The 5-day moving average is at 68.61. The top of the Bollinger band is at 73.14 and the lower edge is seen at 66.23. Perhaps these charts are telling us that the green shoots are indeed weeds and that growth to this economy will be a longer and slower process that previously believed and trumpeted by the media.
Gold will enjoy a point of inflection between Wednesday and Thursday of this coming week. The downtrend line is at 941.90 and the uptrend line is at 927 and they will cross at 934.20 on either mid to late Wednesday or Thursday. The 5-day moving average is at 934.58….same as the point of inflection lines. The top of the Bollinger band is at 961.65 and the lower edge is seen at 916.38. We are in the Ichimuko clouds for the daily time-frame and above the clouds for both the weekly and the monthly time-frames. As to the indicators, both the stochastic indicator and the RSI are pointing higher but not convincingly so. If on the sidelines, stay there until we see which way the market breaks.