Your Economy (No Politics)

[Bullwinkle]

CYCLE/Trend Update for the Week Ahead

As posted in my last update with which this post replies " Now begins warnings season and we have already witnessed a number of high profile companies warn. If what we have seen to date is a precursor of what is to come, then this could get a little dicey." Well so far earnings warnings have picked up and this does not bode well for the overall strength of the economy as we move forward. I also mentioned the following about the COMPQ "As for the COMPQ we are still in an overall uptrend which started back on May 17th, but the 200DMA is dead ahead and the last couple of trading days has us heading in that direction. Should we have a date with this trendline then the target looks to be in the 1960-1980 area and this would be the 4th time we retest the 200DMA since early June. Then there is the issue of COMPQ 2055 put in a few days ago. Along with the prior 2059 top from April 26th, this could form what looks to be a possible double top. Now if the 200DMA does not hold then the double top would appear to be in place and there is not a whole lot to keep us from falling to the 1930's area." This is exactly what played out the past week as the COMPQ fell to 1935 before the bounce on Friday. Whether the earnings outlook should change or not is yet to be seen. As for what we can expect next from the COMPQ could very well hinge on earnings reports going forward. But before I get into what we might expect for the week to come, let's review the Econ #'s for the week...

While it was a quiet week on the Econ #'s front, what numbers we did get were not very encouraging. ISM Services were down considerably, Inital Jobless Claims fell by 39K while Consumer Credit and Wholesale Inventories came in higher than expected.

The coming week will be a busy one and if these Econ #'s continue to disappoint it could make for a very tough week ahead. On tap we have Trade Balance, Treasury Budget, Import/Export Prices, Retail Sales, Business Inventories, PPI and Core PPI, Initial Claims, NY State Empire Index, Capacity Utilaization, Industrial Production, Philly Fed, CPI and Core CPI, Michigan Sentiment and last but not least we have Options Expiry.

Quite a bit of Activity coming up this week and there is one more thing, a mini-cycle turn date on/around July 12th. Well if that's not enough to make your head spin then I do not know what is. A lot of forces at play this week and should make for some very interesting and quite possibly volatile market action.

So what can we expect for the week to come? I believe we will get some consolidation this week as we take in all of the Econ #'s and relieve some oversold conditions. The mini-turn may play a part in this as well, but most likely we will gyrate as seen in mid-March and end of April into May. These downtrend patterns are very similar to what we have now where we got a strong downward move followed by a sideways (of sorts) consolidation period before moving on to lower lows. Options Expiry always plays an incalculable part of the equation, but I don't see the COMPQ going any further than the 1960-1980 area from here where the 200DMA would be a retest of what has now become strong resistance.

Some other issues of note are the Put/Call numbers where there is not that big of a number of Puts as seen in past months. Should MaxPain have any say in the action to be seen it is at 36 for both the QQQ's and the NDX, not far from where we are now. New Low's have outweighed new High's and volume on down days has measurably exceeded that of up days. All of this and the summer dols kicking in leave us in a lackluster market far from having a substantial breakout to the upside.