Once again it is time to review the past weeks market action and we have a lot to review for this trade shortened week, so let's get to it... As previously mentioned im my last cycle trend update with which this post replies, I was looking for more range like movement with an upward bias and that is exactly what we saw. Strange trading though, the first couple of days we had small gap opens that sold off fairly hard for the better part of the day only to completely reverse and finish the day slightly green. Then we saw one big down day and one big up day to finish out the week. The big up day (today) opened with an 18 point gap up and soared to 1995, but all that was gained over and above the gap open was given back and we essentially ended the day where we started at 1978. I find this troubling and will get into that in a moment along with some technicals and cycle dates (a flurry of them this month). First things first, so let's review the Econ #'s for the week.
For the most part we got some decent numbers this week, but they were slightly mixed due to a couple of flies in the ointment that were some of the more important indicators (besides Jobs) reported for the week. Auto/Truck Sales were up slightly with Trucks doing better than Autos even with the high price at the pump. Construction Spending slipped and the ISM Index came in a little higher than expected, but ISM Services fell off considerably from the prior month (fly #1). The Avg Workweek and Hourly Earnings remained flat while Productivity edged upward, but Factory Orders took a dive (fly #2). Then last but not least the Job #'s... Initial Claims fell by 6K, NonFarm Payrolls rose by 248K and the Unemployment Rate remained at 5.6%.
The Econ #'s for the upcoming week are Consumer Credit, Wholesale Inventories, Import/Export Prics, Initial Claims, Treasury Budget, PPI, Trade Balance and a prelim Michigan Sentiment #. We also will be hearing from everyones favorite Fed Chairman on Thursday. Who knows, we may just get a glimpse into what the FOMC is leaning towards with respect to the official meeting and interest rates at the end of the month. I would like to note that if the Treasury Budget and Trade Balance #'s that are due on Friday the 11th continue to follow the trend as seen in past months, this could create some uneasiness going into the following week which happens to also be Options Expiry.
As mentioned earlier, there is a flurry of mini turn dates surrounding the key trend reversal date of June 17th. These dates are the 8th, the 11th (same date as the Treasury and Trade indicators I just mentioned) and the 22nd with the 8th and 11th being so close to each other that the +/- margin for error actually overlaps. Will these dates cancel each other out, mesh into one date or act as continuation patterns for the current movement? It is hard to say, but it could get very dicey in the week or two to come.
The turn dates mentioned along with the Econ indicators and recent lack of enthusiasm may very well kick us into a range like volatile mode until the major turn on the 17th, so they should be watched carefully. Options Expiry is on the 18th and we currently have MaxPain at 36 for QQQ and 35.5 for NDX, so we have a lot of forces at play over the next two weeks. On the technical side, the VIX/VXN are beginning to turn up, $NYSI/$NASI are near or at the 50DMA's and have found this as resistance as of late. Across the board the McClellan Osc's are beginning to turn down and the Bullish %'s are flat. The P/C ratio has been bouncing between .80 and 1.2 throughout the week. Every little bit of news or numbers is being put under the microscope and I expect that to continue for the rest of the year for all of the reasons I am sure you are already aware of but will mention some anyway: Seasonality, Terror Threats, Iraq War, Presidential Election, Price of Oil, Intrest Rates, Houing Bubble, Fed Pump, Inflation, Deflation, Stagflation, Heating Up, Cooling Down and on and on and on. Plenty here to dissect and plenty of opinions too. Opinions are like belly buttons, everybody has one.
Now, earlier in the week I put up a post that pointed to a new record for NYSE member buying since the rally from last year ensued #msg-3214785 but those numbers were from the week ending May 15th. There also seems to be a lot of hedging going on as there is roughly 1.5 million PUTS between the 33-36 QQQ strike. I know QQQ and NYSE function as/of different indices, but you can imagine the activity is all relative. With this in mind we have also been seeing divergences lately such as noted in this post about the extreme McClellean readings #msg-3214782 so it is not too far of a stretch for the imagination to see that between the market action and the divergences we have been seeing in indicators such as the McClellan, P/C Ratio's, VIX, etc. that what we are now seeing is the distribution phase.
So what can we expect for the week to come? I believe we will continue to move slightly higher early in the week and am looking for us to possibly reach COMPQ 2010-2015 provided we can get through the 2000 level. We are currently sitting at the 61.8% Fibo and a run to 2015 does not seem out of the question and would put us at around the 75% Fibo (from the most recent low of 1865 to the last high of 2058). On top of that, today's action left us with an inverted hammer on the COMPQ and if one were to draw the falling resistance line off the January highs of 2153 it coincidentally brings us right into the 2015 area as well. I like it when things line up like that, but doesn't mean it will happen although this is the area I will be looking for the high of this run to be put in. Then I believe chop and slop will be served into Options Expiry, but that's getting a little ahead of myself and I am not quite ready to go there yet.
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