Consumers Are Still Insecure

Consumer confidence came in less than expected. Personally, this was somewhat of a surprise, because I thought with the recent rise in the stock market and lack of "bad economic press", it would have translated into higher consumer confidence levels.

The stock market internals have weakened, as expected. We are very close to taking out yesterday's lows. Today's close will be critical, because there is a reversal pattern forming on a daily chart.

It is no surprise that the stock market is selling off today, given its two week parabolic move higher. The MACD's were warning us yesterday, as there it was diverging from price. Think of it like the smoke that preludes a volcanic eruption.

Fibonacci retracements are a great tool to utilize when you have parabolic movements in price. Given the strength of the move, you typically get retracements to the 23% and 38% levels before resuming trend.

Below, is a chart of the /ES with the Fibonacci retracement levels drawn from the lows of July 13th (the start of the bull run) to yesterday's high.

My first price target on the /ES is around the 955 level. There are other confirming signals around that level which may act as support.

• The 955 level is around the previous resistance level (953).
• There is price congestion around that level, as noted on the chart below.
• The hourly 200 simple moving average (SMA) is approaching the 955 level.
• The 23% Fibonacci retracement level is also around the 955 level.

Bounced As Expected; Now What?

Now that we got the bounce, you will want to watch how the market internals improve. If this is a reversal, from weakness to strength, you will see it in the internals. Typically, they will trend higher, pause, go sideways and then continue higher.

Another key factor you will need to watch will be whether we can take out yesterday's high on the S&P 500, or as I do, watch the S&P 500 futures (/ES) take out first, the overnight high (981.50) then continue to take out yesterday's high of 984.

If it fails, it will be a failed new high, and should send prices lower. How low, will depend on the internals and if we take out yesterday's low (/ES: 969).

Expect some indecision into the consumer confidence numbers at 10:00 AM.

Expecting a Bounce At the Open

I am expecting a bounce at the open of the stock market this morning. The S&P 500 futures (/ES) are trading down 7 handles (points) at around the 973 level.

Yesterday's low was around the 969 level, before we popped and closed higher on the day. This level should attract buyers who missed that level yesterday, causing a technical "double-bottom".

Today's S1 (support level one) pivot is around the 971 level.

Finally, the MACD on the /ES is coming down to a longer support on an hourly chart.

At 9:00 AM, we will get the Case-Schiller reports on housing. This will be the third economic report we receive on housing. The previous two, Existing Home Sales, and New Home Sales reports were received well by the market. Today's report should confirm the former reports. Though, it was interesting to see that the stock market did not react as expected to yesterday's impressive New Home Sales report. It did get a very short term pop, only to sell-off after the fact.

Last night, Jim Cramer mentioned on his Mad Money program, that this type of action is typically a prelude to a brief pause in an over-bought environment. He did mention that Ron Insana, who predicted the price run in the housing sector, is more cautious and sees a more scary sell-off only to regroup and continue its march higher. Jim does not concur; just as he didn't when Ron made the call on the housing sector.

Lastly, do not forget that we will get consumer confidence at 10:00 AM.

Momentum Divergence

First, apologies for not getting the weekly video out yesterday. I was extremely busy with "chores", and thus, was unable to get it done.

Below, I will list major points that I wanted to point out in the video.

1) The weekly VIX Williams %R was at extreme oversold levels around 97.

2) The stock markets are up about 12% in the past two weeks alone. This is the best two week gain since March 2000. What is not mentioned is the start of the dot.com bubble burst that occurred after that.

3) China practically his the 3750 number that I've been posting about. Now will be the test of that theory to see if it will start to pull back.

4) The U.S.A. and China are kicking off talks today.

5) Today, we got phenomenal new home sale figures. The market popped, but subsequently sold off. The close will be the confirmation to the weakness.

6) The MACD on the S&P 500 futures (/ES) hourly chart is not advancing, as price is. If you look at the chart below, notice how the price advanced, but the MACD is actually crossing below the previous level lows of last Friday. The next target for the MACD will be the lows of early last week.

Keep an eye on the /ES hourly MACD's. You want to see both the price and studies moving in concert.

Finally, there will be a lot of key economic reports out this week. The big daddy will be Q2 GDP numbers on Friday.

Simply Amazaing!

At this rate, Dow 10,000 will be here in no time! This is crazy. I hate markets like these, regardless of bearish or bullish direction.

We had similar trading last year and earlier this year, when prices went straight down. It is frustrating, because, you want to wait for pull backs into support, before opening any new positions.

I am still tilted towards a pull back. It will be healthy for this market to give us that. Companies' multiples do not justify their current levels. It is just a matter of time that analysts start downgrading companies on valuation, but with this market, who the hell knows!

We do have a lot of cheerleading on CNBC. Did we really need a two hour special last night on the close above Dow 9,000? What will they do when it closes above 10,000?

China's CSI-300 Index: Impressive

Earlier this week, I posted an analysis on China's CSI-300 index, on how it has been our stock market's leader. I also posted that the 50% Fibonacci retracement is around the 3750 level.

Today, the CSI-300 index traded as high as 3,687, ultimately closing at 3,667. It came within 63 points of the 3750 level.

Bloomberg reported today that China's copper imports are slowing down. Copper has been one of the best performing commodities this year. It has been a leader, pulling up other commodities (oil and other metals), home builders and industrials along with it. If copper starts to soften, it will have a broader impact to the rest of the stock market. Freeport McMoran (FCX) is one way you can play copper.

Personally, I would not be surprised to see China start propping up the US Dollar. It will be to their advantage, as commodity prices should decline. This will allow them to purchase it a lower prices. It will also improve their exports to the USA.

Monitor the CSI-300 index performance next week, and watch the correlation with our stock market. Should be interesting.

Critical Trading Day Ahead

Microsoft (MSFT), Amazon (AMZN) and American Express (AXP) gave us the negative earnings that we needed. It was simply beautiful.

This morning, we have some key energy names, Schlumberger (SLB), Arch Coal (ACI) and an industrial, Ingersoll-Rand (IR) reporting. The energy names will be important, because they have had an impressive run, but more important is the weighting they have within the S&P 500. Ingersoll-Rand will also be one to watch, because it will be compared to Caterpillar's report, which came out this past Tuesday.

The only economic report we have today will be at 9:55 AM EST, with the revision of the Michigan Sentiment. I am expecting that the stock market may rise, in anticipation of good readings, into that number.

Today's close will be critical for my pull-back thesis to hold. Being that today is Friday, it will also impact how the weekly candle gets closed as well.

Finally, I would like to see the dollar index (/DX) close above the 79.30 level, and the VIX to close above yesterday's high (24.05).

Should be a bumpy ride.

Government Buying Stock Market?

Can it be that the government is buying up shares in order to help them sell their health care plan? Makes for a great conspiracy theory!

In one week, we went from the S&P 500 going to 800 to currently going to 1000. If the head and shoulder break would have occurred, it would, most likely, have decreased the consumer sentiment and made it an even harder for politicians to sell their health care initiative to their constituents.

Yes the earnings per share are beating the lowered estimates, but the top line is not. For the price increase that the stock market has enjoyed, where is the growth and justification?

Just thinking...

Bought SDS

I may be a few points early, but I just bought my second batch of SDS, which is a double short inverse ETF of the S&P 500.

The stock market is very strong today, with extremely strong internals. I based my decision on the following:

1) The S&P 500 is up about 100 points from last week. Extreme move in such a short period of time, without any pull back.

2) The volatility index (VIX) is rising on a strong day. It is currently at 23.72. I was looking at support on it around the 22.50 level.

3) The Nasdaq has been the strongest index of the year. If you look at the 5 year weekly chart (see below) of the the Nasdaq Composite, you will see that we closed the gap.

4) Finally, the Nasdaq 100 ETF (QQQQ, also known as the Q's) is coming into a resistance level and a 50% retracement level (see below).

I am not expecting that we retrace all the way back down to the low 900's, but my target on the /ES will be around the 925 level or so.

5 Year Nasdaq
5 Year Q's

Caterpillar (CAT): Stock of the Day

This morning, Caterpillar (CAT) reported earnings that beat estimates on the bottom line by a very wide margin ($.72 vs. $.22), but reported top line figures below estimates just under $1 billion ($7.98 vs. $8.86).

This becoming a common theme where companies are beating on the bottom line, but revenues are coming in short of expectations. You would think that revenue growth would / should be an important factor in calculating share price!

They rose their full year forecast to $1.15 to $2.25 per share, above current estimates of $1.13. You can read the full report here at Bloomberg.

Caterpillar will be the stock of the day. It is currently up about 12% in pre-market action. Yesterday, it closed up 7.83%. Jim Cramer mentioned owning this yesterday on his evening Mad Money show on CNBC.

I do not own shares in this, and will not be chasing today. It has had an enormous run, and it is around resistance levels. I would like to see it come back to around the 32.50 - 35 level before contemplating entry.

As you can see in the charts below, there is a 50 SMA on the weekly chart at 38.65 level. There is also a 38.2 Fibonacci retracement (from high to low) around the 44 level. Finally, there is resistance around the 40.50 level.

I will be patient, and wait for this to pullback. This will be the hardest part; doing nothing!

Weekly

6 Month Daily

Stock Market Today: 7/20/09

After a choppy start to today's stock market trading, the markets took off, closing at year highs on the S&P 500 and Dow Jones Industrials. Note, they have not yet taken out the yearly highs, but at this rate, that is just a matter of time.

Major Markets

S&P 500 (SPX)	1.14%
Dow Jones Industrials (INDU)	1.19%
Nasdaq Composite (COMP)	1.20%
Russell 2000 (RUT)	1.47%
10yr Treasury Yield (TNX)	-1.81%
Dollar Index (/DX)	-0.64%
Oil (/QM)	1.31%
Gold(/ZG)	1.36%
Volatility Index (VIX)	0.16%

Top 3 Sectors Up

Biotech Index (BTK)	16.31%
DJ Gambling Index (DJUSCA)	5.88%
DJ Coals Index (DJUSCL)	4.73%

Top 3 Sectors Down

Tobacco Index (TOB)	-0.06%
KBW Bank Index (BKX)	-0.05%
DJ Water Index (DJUSWU)	0.12%

Goldman Sachs came out his morning and rose its price target on the S&P 500 to around the 1050 level or so. Of course, it coincides with the 200 SMA level on the SPX monthly chart.

There is a lot of bullish sentiment out there. Put that with low trading volume, it's no surprise that the trend has continued higher. It is frustrating to just get a one-sided bias. As a trader, you wait for pull-backs before jumping into any trade (long or short). But we are not getting any meaningful pull-back to warrant a dip in the water. As such, I have decided to wait out this week and see how the market reacts to the slew of earnings.

Because, news trumps technicals, I do not put too much wait into patterns, studies and other technical analysis isms. My plan is to wait for the dust to settle, check for confirmation and/or divergences, and trade accordingly next week.

We have big companies reporting earnings tomorrow before the bell and after. Unless Fed Chairman Ben Bernanke flutters at his monetary testimony, I am expecting a choppy mess of a trading day.

I did enter a credit call spread (165/170) on Goldman Sachs today, based on my earlier analysis.

These are the times I wish I had a remote control like Adam Sandler had in the movie Click!

Tale of Two Endangered Species Brokers: Goldman Sachs & Morgan Stanley

There is a reason why Goldman Sachs is labeled the "golden standard". The reason may be different to whom you ask, but look at the performance between to the two remaining big broker dealers: Goldman Sachs (GS) and Morgan Stanley (MS).

Below are 2 year weekly charts of the two companies. Notice how Goldman is just shy of its 200 SMA, while Morgan is not even close its 200 SMA. I would expect Morgan to play catch up to its big brother, and with earnings this week, it may have that chance.

Since Goldman's 200 weekly SMA is just above at around the 160 level, I would expect it to act as resistance and either slow it down, or pull it slightly lower into support. Check out the GS AUG 165/170 call credit spread. A credit spread is a good strategy where you expect a stock to go a little higher, sideways or even down.

Stock Market Weekly Trading Recap: Watch Nasdaq

Very tough tape to trade last week. I expected a bounce, potential failure of the touted head & shoulders pattern. I expected a bounce to the S&P 500 885 - 900 level, but that was about it.

I was wrong by going short at the 900 level, but had to cover it quickly when it went higher. When CNBC reporters start talking about technical patterns, watch out!

This week will be critical to confirm last week's bullish reversal. Though, I am expecting mainly a sideways, choppy stock market.

As noted in the video below, make sure you have confirming signals to confirm your expected direction / bet. You always want to have a confluence of indicators, versus diverging signals for confirmation.

Stock Market This Week: 7/20/09

Get ready. We are about to be bombarded with earnings from 29% (143) of the companies listed in the S&P 500.

Lucky 7's? The markets were up about 7 percent last week. Whether you were long or short, trading last week had to the hardest it has been in a long time. No one expected the market to practically go straight up, especially the magnitude of the move.

Intel reported last Tuesday afternoon, while the futures market was closed. It reported stellar earnings and guidance, causing the price to exceed the expected move. When the futures market reopened, the /ES (S&P 500 mini futures) gapped up over 7 points! I have not seen that kind of a gap in the futures market for quite some time.

When everybody starts talking about chart patterns / formations, you know it's time to move away from that thesis. It has failed. The 870-880 level on the S&P 500 has proven to be a formidable support line. If for some odd reason (earnings or some exogenous news event) we get down to that level and crack it: Look Out!

The doji formation on the monthly index charts of the S&P 500 and Dow Jones are still intact. The close of this week's candle on these markets will tell us if it will be broken and thus, failure. With the bevy of earnings that are slated to report this week, I am 99% confident that we will get some closure to continued strength or possible down-side movement.

What's interesting is that other than Goldman Sachs (GS), the financials did not perform well last week. Tech, as for most of 2009, was the leader last week. It made fresh yearly highs last week.

Tech giants (AAPL, YHOO, MSFT; to name a few) will be reporting this week. They have had an enormous rise into earnings.

If the tech sector falters this week, and the S&P 500 and Dow Jones Industrials fail to make new yearly highs, it could be an ominous signal for the rest of the stock market.

P.S. Yahoo's earnings report should be interesting to see if they confirm or dispel the Microsoft rumors!

Economic reports will take a back seat to earnings this week. Note, Fed Chairman, Ben Bernanke, will be testifying on monetary policy on Tuesday at 10:00 AM.

Here are the earnings that will garnish a lot of attention:

Monday

Before Market Open (BMO)

Halliburton (HAL)
Johnson Controls (JCI)

After Market Close (AMC)

Boston Scientific (BSX)
Legg Mason (LM)
Texas Instruments (TXN)
Zions Bancorp (ZION)

Tuesday

Before Market Open (BMO)

AK Steel (AKS)
BJ Services (BJS)
BlackRock (BLK)
Caterpillar (CAT)
Coca-Cola (KO)
Continental Air (CAL)
DuPont (DD)
Freeport-McMoRan (FCX)
Hudson City Banc (HCBK)
Jefferies Group (JEF)
Lockheed Martin (LMT)
Merck (MRK)
Peabody Energy (BTU)
Quest Diagnostics (DGX)
Regions Fincl (RF)
Schering-Plough (SGP)
Sherwin-Williams (SHW)
Southwest Air (LUV)
State Street (STT)
TD Ameritrade (AMTD)
UAL Corp. (UAUA)
United Tech (UTX)
UnitedHealth (UNH)
Vornado Rlty Trust (VNO)
Western Union (WU)

After Market Close (AMC)

Advanced Micro (AMD)
Apple (AAPL)
Boston Prpts (BXP)
Gilead Sciences (GILD)
Linear Tech (LLTC)
Seagate Tech (STX)
SLM Corp (SLM)
Starbucks (SBUX)
Yahoo! (YHOO)

Wednesday

Before Market Open (BMO)

Altria (MO)
Bank of NY (BK)
Boeing (BA)
Delta Air Lines (DAL)
Eli Lilly (LLY)
Genzyme (GENZ)
Morgan Stanley (MS)
Northern Trust (NTRS)
PepsiCo (PEP)
Pfizer (PFE)
Piper Jaffray (PJC)
St. Jude Medical (STJ)
SunTrust Banks (STI)
US Bancorp (USB)
Wells Fargo (WFC)

After Market Close (AMC)

E*TRADE (ETFC)
eBay (EBAY)
Equifax (EFX)
Intuitive Surgical (ISRG)
Mosaic (MOS)
Noble Corp (NE)
OSI Pharm (OSIP)
Qualcomm (QCOM)
Raymond James (RJF)
SanDisk (SNDK)
Steel Dynamics (STLD)
VMware (VMW)
Walter Inds (WLT)

Thursday

Before Market Open (BMO)

3M (MMM)
AT&T (T)
Ball Corp (BLL)
Bristol-Myers (BMY)
Bunge (BG)
Cash America (CSH)
Celgene (CELG)
CIT Group (CIT)
CME Group (CME)
Coventry Health Care (CVH)
Diamond Offshore (DO)
EMC Corp (EMC)
FLIR Systems (FLIR)
Ford Motor (F)
Goodrich (GR)
Huntington Banc (HBAN)
Intl Game Tech (IGT)
Jetblue Airways (JBLU)
L-3 Comms (LLL)
Laboratory Corp (LH)
Manpower (MAN)
McDonald's (MCD)
Newmont Mining (NEM)
Nucor (NUE)
Occidental Petro (OXY)
Philip Morris International (PM)
PNC Bank (PNC)
Potash (POT)
Raytheon (RTN)
Reliance Steel (RS)
Reynolds American (RAI)
Safeway (SWY)
Starwood Hotels (HOT)
T. Rowe Price (TROW)
Union Pacific (UNP)
UPS (UPS)
US Airways (LCC)
Wyeth (WYE)

After Market Close (AMC)

Amazon.com (AMZN)
American Express (AXP)
Baidu.com (BIDU)
Bucyrus (BUCY)
Cabot Oil & Gas (COG)
Capital One (COF)
Cheesecake Factory (CAKE)
Deckers Outdoor (DECK)
EZCORP (EZPW)
Juniper Networks (JNPR)
KLA-Tencor (KLAC)
Leggett & Platt (LEG)
MEMC Elec (WFR)
Microsoft (MSFT)
Nutrisystem (NTRI)
Rambus (RMBS)
Sunpower (SPWRA)
Travelzoo (TZOO)

Friday

Before Market Open (BMO)

Arch Coal (ACI)
Ashland (ASH)
Black & Decker (BDK)
Fortune Brands (FO)
Ingersoll-Rand (IR)
Schlumberger (SLB)

China CSI 300 Index US Stock Market's Leading Indicator?

The stock market rally we that we have enjoyed this year, from the abyss of March, can truly be attributed and credited to China's CSI 300 performance.

While our stock market continued to tumble into March, China on the other hand, failed to make new lows. China bottomed out last November, and has trended higher ever since.

There seems to be a correlation between the CSI 300 index and Copper futures. They both seem to have similar patterns (see images below*).

China is getting ready for its 60th anniversary of the Communist Party rule in October 2009. Premier Wen wants economic growth and stability leading up to the anniversary, as the whole world will be watching.

This reminds me of last year, when China held the summer Olympics. They were aggressively spending and growing to put on the greatest show ever. This led the CSI 300 to all-time highs of 5877 (10/16/2007). There was a subsequent push higher, but failed at 5696 (1/15/2008).

Everyone was screaming that it was a massive bubble, similar to the dot com bubble. Prices fell 44% to 3267 (4/21/2008) only to stabilize briefly into the summer Olympics. The brief rally took prices higher to 4055 (5/5/2008) only to continue the precipitous drop to 1627 (11/4/2008).

When the dust settled, the CSI 300 had fallen over 72% from its all-time highs of 5877! All this occurred in thirteen months.

In the middle of June 2009, the CSI 300 broke an important resistance level of 3000. It appears to have its eyes set on 3750, which represents a 50% Fibonacci retracement level (from the highs of 5877 to the lows of 1627). Expect some pullback at that level, as 50% retracement levels are strong support or resistance points.

The 3750 level is only 6.6% away from Friday's close of 3519. As we approach that level, I will focus on copper's reaction. There is support at the $2.00 level on copper.

One way to play copper is Freeport McMoran (FCX). This stock will be reporting earnings this week (July 20th, AMC).

If the CSI 300 index starts to pull back from the 3750 level, I will watch to see if the 3000 level will hold.

Will history repeat itself, and cause our stock market to follow the CSI 300's lead? Only time will tell.

CSI 300 Five Year Chart


CSI 300 One Year Chart


Copper Weekly Chart


* Charts courtesy of Bloomberg and CME Group

Stock Market Today: 7/17/09

Unusually light volume for an expiration day. Pretty much a non-event of a day.

Major Markets

S&P 500 (SPX)	-0.04%
Dow Jones Industrials (INDU)	0.37%
Nasdaq Composite (COMP)	0.08%
Russell 2000 (RUT)	-0.54%
10yr Treasury Yield (TNX)	2.64%
Dollar Index (/DX)	0.13%
Oil (/QM)	2.12%
Gold(/ZG)	-0.92%
Volatility Index (VIX)	-4.25%

Top 3 Sectors Up

Tobacco (TOB)	2.47%
Housing (HGX)	1.24%
Semiconductor (SOX)	1.22%

Top 3 Sectors Down

DJ Real Estate (DJUSRE)	-2.43%
KBW Bank (BKX)	-2.16%
DJ Internet (DJUSNS)	-1.63%

General Electric (GE), Bank of America (BAC) and Citigroup (CI) were the highlight earnings announcements of the day. Bank of America and Citigroup opened higher and closed lower, while General Electric gapped lower and closed near the lows of the day.

IBM and Google reported earnings Thursday, after the stock market closed. IBM raised its earnings, while Google appeared to have missed.

I would expect some weakness in IBM as it closed right at a 78.6% Fibonacci retracement. I would like to see it come into the 110 level and hold, before considering any longs. This would also fill the gap that was produced yesterday.

Late in the day, Brazilian mining company, Vale, denied that it is interested in buying Mosaic (MOS). This caused a massive drop in price around 3:30 PM. On a daily chart, Mosaic formed a massive topping-tail. They are to report earnings on July 22 (AMC: after market close).

The rumors of the potential buyout caused a gap up on Thursday. Watch for any violation of that gap, as it may try to close it; to around the 45 level. This stock is very volatile, just as most of its peers, including Potash (POT). Be very nimble and don't become complacent.

Yahoo / Microsoft Deal Close

The folks over at 247wallst.com are citing sources that a deal with Yahoo and Microsoft may be "imminent". They speculate that Yahoo shares can jump $4 or $5 on the deal, if does materialize.

You can read the whole post at 24wallst.com.

P.S. Yahoo will report earnings next Tuesday, July 21 AMC. Microsoft will report its earnings two days later on Thursday, July 23 AMC.

We should get some clarity hopefully by Tuesday.

Obama, Sarkozy & The Lady

This is classic. The buzz today is about President Obama and French leader Nicolas Sarkozy checking out this young lady's back.

Below is a video of the incident. You decide!

If the video does not work, click here to take you to Yahoo.

Market Weak; VIX So-So

Market is weak today, on the heels of weak consumer sentiment, but the VIX is not rising as fast as you would think in correlation with the price decline. I would like to see the VIX rise to at least 31.50 to confirm this down move.

Keep in mind, that we have S&P 500 support at 870 from earlier this week.

Stock Market Today: 7/8/09

Interesting day today. Crude continued its decline, but it may be waning.

Major Markets

S&P 500 (SPX)	-0.17%
Dow Jones Industrials (INDU)	0.18%
Nasdaq Composite (COMP)	0.06%
Russell 2000 (RUT)	-0.94%
10yr Treasury Yield (TNX)	-4.94%
Dollar Index (/DX)	0.02%
Oil (/QM)	-4.46%
Gold(/ZG)	-2.16%
Volatility Index (VIX)	1.46%

Top 3 Sectors Up

Retail (RTH)	2.07%
Oil Service (OIH)	1.19%
Pharma (PPH)	1.06%

Top 3 Sectors Down

Gold Miners (GDX)	-3.62%
Shippers (SEA)	-3.00%
Broker Dealers (IAI)	-2.77%

Market internals were weak, with increasing volume this morning. Stocks started their reversal around 12:40 this afternoon. It appeared that it may be have been short covering ahead of the 10 year Treasury auction announcement, but the oil services ETF (OIH) surprisingly made lows at around 11:30 this morning.

We did break the lows on the futures around 2:30 PM, but that was so short lived; appeared to have suckered shorts in only to rally into the close. Could Alcoa's (AA) CEO comments from yesterday been the reason?

Well, after hours, Alcoa reported better than expected earnings. It is trading up as I type this trading recap.

There was high demand for the 10 year Treasury note auction today, causing the yield to go down (prices go up, yields go down). Looks like the yield may be headed down to the 3% level.

The market liked the number, but did it? Not sure if today's action is proof of that. As I posted earlier, if long term yields keep going down, deflation fears may come back into the market. Also, is this the beginning of a rotation out of stocks and into bonds; go from risk to risk adverse? Time will tell. Just use this as part of your overall planning.

Not much came out of the G8 meeting, as President Hu left the meeting early to deal with local unrest.

We did break the neck lines on the head and shoulder patterns. This could have explained the bearish price action this morning. Funny how the pundits on TV are now talking about this. They should have read my post, for a heads-up!

Today's break does not entirely mean that we are headed to 810. The neck line will have to be tested. If it does not pass, meaning that bulls come in and start buying the market higher, then today's break will be nothing more than a fake out. We need confirmation. If we close above 900 on the S&P 500, then I will take off my bearish posture. Until we do, my stock market posture is bearish.

If you trade the 3X financial ETF's (FAS/FAZ), be aware that they will be undergoing a reverse split: FAS: 1 for 5, and FAZ: 1 for 10. These should only be used as very, very short term trading vehicles.

Tomorrow's Items of Note

• Bank of England' monetary decision, around 7:15 AM
• Weekly unemployment numbers at 8:30
• 30 Year Treasury auction results around 1:00 PM

Looking to Cover Remaining Half

I am looking to cover the remaining half of my SDS and MSFT shorts. I am seeing support in the S&P 500 around the 860 - 865 level.

My direction is still bearish, but I would not be surprised to see a bounce around those levels.

High Demand for the 10 Year Treasury Note

The bid to cover came in 3.28, higher demand for the 10 year Treasury notes. This caused a drop in the 10 year yield (as prices rose) and a pop in futures.

The one question that I have, is, why would there be huge demand for 10 year notes? Are investors taking the risk-play off the table? You would think that this would not be good for stocks, but I'm not an economist, so take it for what it is -- food for thought!

All Eyes On Crude Oil

This whole rally has been mainly on the backs of commodities and related stocks. Crude oil has been in the news a lot lately. There's talk about new regulation, restrictions and who knows what else.

If the commodities are to fail, this will add to the deflation story, not expansion, and has the potential to take the market with it. Especially since the energy sector is a big portion of the S&P 500.

All eyes will be on the weekly inventory report today at 10:30. This should be a market mover. As of 9:25 AM, today's high and low in crude are: 62.68 and 61.68. As usual, expect there to be knee jerk reaction to the news. Let it settle down, then use the levels in your trading analysis.

Stop The Presses: IMF Raising Outlook on Economy

The IMF came out this morning and issued a statement where it's raising the global economic outlook. They say that the rebound next year will be stronger than initial projections back in April.

This caused a pop in futures this morning. I will not make any judgements, but only wait to see how the market reacts to this.

Interesting Analysis by Art Cashin: Dow Trapped in 17-Year Cycle

Art Cashin came on this morning at his usual time slot on CNBC and made an interesting analysis. He said that the Dow is trapped in a 17 year cycle.

Between 1982 and 2000, anything you threw at it, would go up (he uses the analogy of darts). Side note, how does this theory play with the crash of 1987 and the bear markets of the early 1990's?

He believes that we may be on the other side now, where the markets may go lower.

Stock Market Today: 7/7/09

What a difference a day makes! Yesterday, we opened lower, at pivot support levels and then traded higher, while the internals were negative all day. Market breadth went higher towards the end of the day, but still finished lower.

Major Markets

S&P 500 (SPX)	-1.97%
Dow Jones Industrials (INDU)	-1.94%
Nasdaq Composite (COMP)	-2.31%
Russell 2000 (RUT)	-1.98%
10yr Treasury Yield (TNX)	-1.31%
Dollar Index (/DX)	0.30%
Oil (/QM)	-2.42%
Gold (/ZG)	0.09%
Volatility Index (VIX)	6.38%

Top 3 Sectors Up

Health Care (XLV)	-0.39%
Gaming (BJK)	-0.46%
Pharma (PPH)	-0.58%

Top 3 Sectors Down

Solar (TAN)	-4.87%
DJ Real Estate (IYR)	-4.68%
Broker Dealers (IAI)	-4.55%

Futures were up this morning before reversing around 6:15 AM, almost similar to yesterday's price action when the futures reversed higher around 7:00 AM.

Yet again, it was crude that led the markets lower, and was a prelude to today's price weakness. Crude traded as high as 64.88 this morning, when a report came out that the CFTC is looking to curb speculative trading. This immediately had an adverse reaction in crude, as prices started going down. It is interesting to see what will come of this. What will the impact be of the ETF's that are used as vehicles, mainly by average investors?

Speaking of ETF's, UNG was halted today pending news, which was something to the effect that there isn't enough shares for new issuance.

It was interesting to see that the Nasdaq was the weakest. Google closed below 400. Microsoft was weak, as they warned about another security flaw in Internet Explorer (no fix yet).

Yesterday's hammer formation on the indexes were invalidated today with the lower closings. All indexes closed at, or close to their lows of the day:

The S&P 500 closed below its 200 day moving average. The Nasdaq closed below its 50 day moving average. The Russell 2000, broke the neckline, as mentioned in the weekly video. Keep an eye on 475, initial target, before a bounce back up to the neck line.

The treasury 3yr auction's bid-to-cover (demand) was so-so today. Yields were higher, I take it to entice purchases.

Prices did spike in early afternoon when Aloca's CEO stated on Bloomberg that he's "very optimistic" on China. He sees other sectors bottoming, even some improvement in the auto sector. What irks me here is that they are due to report earnings tomorrow. Why is he even talking ahead of it? Aren't they under a lock out period until the release? Come on.

There is talk of yet another stimulus plan, but was put down by Senate Majority Leader Harry Reid. He said that there is no need for another stimulus plan. This came around 3:00 PM, which caused an acceleration to declining prices.

Big day tomorrow:

• Weekly crude inventories will be released at 10:30 AM.
• The G8 will be meeting in Italy.
• Alcoa (AA) will kick off Q2 earnings AMC.
• There will be yet another auction (10yr), with results around 1:00 PM.

New Post Coming

I will be posting a trading day recap in just a bit. Hopefully you have been getting my tweets, it's the quickest way for me to post intra-day ideas.

dirtyGum Facebook & Twitter Page is Live

I have published my Facebook page tonight. I still have to make some final changes, mostly cosmetics, but I wanted to push it out.

I also have my Twitter site up. I'll be tweeting quick posts, and other thoughts that come to mind.

Again, both sites are not complete, as they are continued works in progress :)

Stock Market Weekly Trading Recap - Will Support Hold?

The market's reaction to last Friday's jobs number was obviously bearish. The major market indexes closed the week out lower, and have come into, or close to, critical short term support levels.

Here are the key support levels to watch this week on the major indexes:

S&P 500 (SPX): 875 - 880
Dow Jones Industrials (INDU): 8200
Nasdaq (COMPQ): 1750
Russell 2000 (RUT): 490

Hopefully we will get an injection of increased volume this week, as we get Q2 earnings started this Wednesday with Alcoa (AA). I strongly believe that a lot depends on this earnings season, as investors will be closely monitoring key sectors for their guidance and economic outlooks.

Stock Market This Week: 7/6/09

Q2 earnings season kicks off this week with Alcoa (AA), when it reports earnings this Wednesday July 8th AMC (after the market closes). It will garnish a lot of attention, because it primarily produces aluminum that touches many sectors of the economy (air crafts, autos, etc.).

Focus on their guidance, economic outlook, and overall forecast. This will be the on-going theme during the upcoming earnings season. BTW, Big daddy Goldman will be the story the following week (July 14th).

Not much on the economic calendar this week. Though, you will want to pay close attention to the weekly crude inventories on Wednesday and the weekly jobless claims on Thursday.

The G8 (group of eight nations) will be meeting this Wednesday, July 8th, in Italy. Already this morning, according to Bloomberg, European Central Bank President Jean- Claude Trichet mentioned that he is worried about a lack of coordination among the central banks and its potential for the financial crisis to persist around the world.

The treasury will have yet more auctions this week. The auctions of note will be Tuesday (3 year), Wednesday (10 year) and Thursday (30 year). As with the other auctions, pay attention to the bid to cover ratio.

Earnings Highlights:

Monday
China Medical Tech (CMED)

Tuesday
Ruby Tuesday (RT)

Wednesday
Family Dollar (FDO)
Alcoa (AA)

Thursday
Shaw Group (SGR)

S&P 500 Negative Divergence

Leading up to June 5, the stock market was clearly making new highs for the year. Since then, it has not made new highs, though it chopped around it for some time.

As the price made highs that day, the studies were not confirming the move. This is called negative divergence. The studies I use are the MACD and Williams %R.

Never look at price action, candle formations / patterns by themselves. You need multiple confirmations.

Stock Market Today: 7/2/09

Green shoots, green shoots, or rotten tomatoes? I can't take it anymore with these pundits and tv personalities harping and mentioning green shoots in respect to the economy! Sorry.

Major Markets

S&P 500 (SPX)	-2.82%
Dow Jones Industrials (INDU)	-2.50%
Nasdaq Composite (COMP)	-2.67%
Russell 2000 (RUT)	-3.91%
10yr Treasury Yield (TNX)	-1.38%
Dollar Index (/DX)	0.81%
Oil (/QM)	-3.91%
Gold (/ZG)	-1.29%
Volatility Index (VIX)	6.60%

Top 3 Sectors Up

Semiconductors (SMH)	-0.87%
Agriculture (MOO)	-0.90%
Airline (FAA)	-1.40%

Top 3 Sectors Down

Oil Services (OIH)	-4.87%
Insurance (KIE)	-4.68%
Commercial Real Estate (IYR)	-4.55%

Back to our regularly scheduled program. The unemployment numbers did in fact come in worse than forecast. The market opened extremely weak, and did not look back. There was a brief moment where it looked like the Nasdaq would go higher, but it was not to be. Internals were just too heavy for it to go up.

Luckily, the stop was never triggered, yesterday, on my trade idea (DUG). It performed beautifully today! If you have not done so, move your stop up to break-even. I would look to sell at least half into some strength and let the rest ride. If it does continue to go higher, you can always get back in, and trail your stop higher.

Potash was strong all day, as Bloomberg reported that Uralkali, Russia's second largest potash producer, raised its pricing on growing demand.

The weak close, for the day and week, was atypical for this holiday shortened trading week. Volume did pick up from the prior day, so it did register a bearish distribution day.

Earnings gets kicked off next week. Also, there will be more auctions from the Treasury.

The possible head and shoulders formation on the S&P 500 looks to be in its final formation. I am looking for an initial bounce if we do get down to the 875 - 880 level Monday. I will have more in the video, later this weekend.

Have a safe, enjoyable fourth of July holiday weekend!

Key Retracement to Watch S&P 500

We received weaker than expected economic numbers this morning. The market internals are completely in the red, and very very weak.

The 61.8 Fibonacci retracement level on the S&P 500 (SPX), from the lows of June 23rd is 905. The ultimate line in the sand, 78.6 level is at 898.

Expect bounces, especially at the 61.8 level. Let's see if we have continued selling pressure throughout the day.

With the three day weekend, will investors hold long or sell into the weekend? Should be interesting to see how the market trades towards the afternoon. I am expecting lighter volume, as most will be leaving early for the July fourth holiday weekend.

P.S. Do not forget the news overseas in North Korea. Make sure you have hedges on.