As we move forward curing some of the wounds of the excesses of the last bubble, we are beginning to see some stability in the stock market and the economy. True we are not going from “bust to boom” anytime soon, but the “bust” part is leveling off and finding support. In other words, while we are not returning to the expansion of the past, we have stopped the “free fall.” And now, dear friends, the lawyers step in to feed on the morsels of food on the bottom of the economy floor. They plant these morsels into full grown plants before harvesting the billions in fees waiting in the wings. For every collapse, there is some entity held accountable and that is where the attorneys step in. S&P, Moody’s and Fitch are the first targets in the sites of this group. This certainly should be an interesting summer.
We are beginning to see the door of employment begin to open at some financial firms. This is a good sign. The openings are very tentative, as though testing the waters before fully plunging into the drink. We will closely watch this to see how it pans out. It could be a replacement crew for then next round of beheadings of the more seasoned people, or just a replenishment of the work-force. There is no way to figure this out until the pattern becomes more pronounced. The good news is that Wall Street firms are beginning to hire again. The federal minimum wage rises this week to $7.25 from $6.55, for the undocumented workforce….no change in wages.
Monday: June leading indicators are released at 10:00. Tuesday: Federal Reserve Chairman Bernanke testifies on the “hill.” Wednesday: A repeat of yesterday’s script by Chairman Bernanke on the “hill.” Thursday: June existing homes sales are released at 10:00. Friday:
July
University of
Michigan sentiment is released at 9:45 – 10:00.
The US Dollar Index left a doji-like candle on the chart as a result of the Friday session. Neither bull nor bear won the war although the print was that of a higher high and higher low. The stochastic indicator is oversold and curling up without issuing a buy-signal at this time. All the other indicators are going sideways near oversold levels but not showing direction. We broke below the trading range of the past few weeks opening the door to 79.0185, 79.075, 78.550 and 78.375. On the upside we have a downtrend line at 79.619 and further resistance at 79.893 and 80.204. The 5-day moving average is at 79.801. The top of the Bollinger band is at 81.318 and the lower edge is seen at 79.371. We are below the Ichimuko clouds for the daily, weekly and monthly time-frames. The uptrend line is at 79.411 for the Monday session. We believe that by late Tuesday or Wednesday that this market will make a decisive move. There will be a point of inflection during that time which should paint the chart clearly so follow the direction and don’t fight the trend.
The S&P 500 futures contract closed the Friday session near the highs of the day with another positive session, the fifth in a row. We are extremely overbought as measured by the Thomas DeMark Expert, the stochastic indicator, and the RSI. That said, we are not seeing any sell-signals from any of these indicators. We certainly wouldn’t be surprised to see some backing and filling in the next several sessions to relieve this overbought condition. We have several astrologers warning about a peak in the market, remember last week we had a Bradley cycle due, which did nothing to intimidate the bulls. The S&P 500 closed above the Ichimuko clouds on the daily chart but remains below the clouds for both the weekly and the monthly time-frames. If we could see a close above 957.50, we believe that the bulls would take control over this market and force the shorts to cover causing a rally to 1008.50 in short order. On the other hand, we have lots of supply all the way up the chart and, we are currently overbought. Above 1008.50 there are lots of areas, on the Market Profile chart, of single prints on the weekly chart. There is even a gap on the chart from 1044 to 1098. Remember that a gap lip will offer resistance. Once that has been removed, the gap is rarely filled on the first attempt. It will take several attempts to push higher and then the gap will be closed.
The NASDAQ 100 removed the highs of June 10th in the Friday session closing the session very close to the highs of the day. This index seems to be leading the charge higher pulling the other indices along. We are grossly overbought as measured by all of the indicators that we follow herein, however; we have no sell signals. We are above the Ichimuko clouds for the daily time-frame and in the clouds for both the weekly and the monthly time-frames. The 5-day moving average is at 1485.45. The top of the Bollinger band is at 1521.81 and the lower edge is seen at 1388.39. This is the highest level we have seen since September of 2008. Can we continue the charge higher? There is good resistance at 1584.90 and 1624.36. The point and figure uptrend line is at 1513.75 or so. There is also support at 1519.80. We would watch this chart carefully for information regarding the other indices.
The Russell 2000 was the worst of the indices in the Friday session only gaining a thin dime on the day. All the indicators that we follow herein are overbought and seem to be going sideways. Friday’s session was an inside day. The 5-day moving average is at 506.76. The top of the Bollinger band is at 525.41 and the lower edge is seen at 471.76. The daily Market Profile chart shows us that above 530.40 there is a single print at 535.60. When looking at the weekly chart, we see single prints at 575.70 and a gap in the chart from585.80 to 616.10. We have to remember that because these are futures charts of financials that the front months always are the active months and therefore a longer view could be skewed because of lack of volume. That said, it is also clear that as we rally to higher levels, that there will be less supply overhead. We are above the Ichimuko clouds for the daily time-frame and in the clouds for the weekly time-frame. The weekly chart is more positive than is the daily chart showing that this market has more room to the upside. The daily chart shows that this market will need to either retreat or consolidate to relieve the overbought conditions. Remember, this market needs to stay above 470.60 on a closing basis or, risk downside pressure.
Crude oil has made a rounding bottom and unless it trades below 58.32, we will see continued forays to the upside. We are inside the Ichimuko clouds for the daily time-frame, below the clouds for the weekly time-frame and above the clouds for the monthly time-frame. We have continued buy-signals from all the indicators that we follow for all time-frames. The 5-day moving average is at 61.26. The top of the Bollinger band is at 73.36 and the lower edge is seen at 57.16. As we cross above the 20 period moving average of 65.26, we should see the shorts become worried and this could lead to a rally as they cover their positions.
Gold looks as though it could change directions and go to the downside. We have a doji candle on the chart as a result of the Friday session. The 5-day moving average is at 931.52. The top of the Bollinger band is at 948.14 and the lower edge is seen at 910.51. We are in the Ichimuko clouds for the daily time-frame and above the clouds for both the weekly and the monthly time-frame. The indicators for all time-frames remain on a buy-signal. The market could retreat to 912.16 and remain in an uptrend. We would not be surprised to see the market back and fill a bit at this time. Should we march higher, we will have resistance at 947.00 above that level there is 956.50, 966, 983 and of course 990. The Friday session was an inside day and we would expect to see some backing and filling.