SHORT TERM: market rebound nearly fully retraced, DOW -279
Overnight the Asian markets were mixed. Europe opened lower and lost 1.05%. US index futures were lower overnight, and at 8:15 the ADP index was reported much lower than expected: +38K vs +179K. The market opened at SPX 1345, where it closed yesterday, but immediately headed lower. At 10:00 ISM manufacturing came in lower: 53.5 vs 60.4, and Construction spending remained positive: +0.4% vs +1.4%. Also at 10:00 the FED reported the following: http://www.federalreserve.gov/newsevents/press/bcreg/20110601a.htm. The pullback continued until about 11:00 when the SPX hit 1328, wiping out all of yesterday’s gain. After a 5 point bounce to SPX 1333 by 11:30 the market headed lower again. In the afternoon Ford reported flat monthly sales, and GM reported sales -1.2%. Around 2:00 FED general counsel Alvarez’s Congressional testimony was released: http://www.federalreserve.gov/newsevents/testimony/alvarez20110601a.htm. The market continued lower right into the close when it nearly wiped out the entire three day rally from SPX 1312. After hitting SPX 1314 the market closed at 1315.
For the day the SPX/DOW were -2.25%, and the NDX/NAZ were -2.20%. Bonds gained 28 ticks, Crude dropped $2.55, Gold added $3.00, and the USD was marginally higher. Support for the SPX remains at 1313 and then 1303, with resistance at 1363 and then 1372. Short term momentum hit quite oversold in the afternoon. Tomorrow, weekly Jobless claims and Q1 Productivity at 8:30, then Factory orders at 10:00.
Talk about a complete reversal. Yesterday the market gapped up 10 SPX points, pulled back, and then closed at the high for the day SPX 1345. Today the market opens flat, then sells off wiping out all of yesterday’s gains and then most of the three day rally from SPX 1312. Risk trade on, risk trade off. With the break through support at SPX 1331 this morning, the recent rally looks more like a B wave in an abc-x-abc correction (DOW hourly chart). And/or, the double three count on the SPX hourly chart. Good support is at the OEW 1313 pivot, then the 1303 and 1291 pivots below that. Overhead resistance now around SPX 1330, then the 1363 and 1372 pivots above that. The DOW is displaying a positive divergence. Let’s see if this holds and is followed by the same in the SPX. Best to your trading!
MEDIUM TERM: downtrend low SPX 1312
LONG TERM: bull market
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
Tony, it looks we have 5 waves up…b and c should follow …and we may have the first correction completed from 1345….so do we have the first wave down at 1306 ?
target for the possible w2 at 1330 ? …50% retrac
MGD looking bottom up from here unless the OEW 1313 pivot fails.
that’s 3 hits on 775 pivot ZW
http://screencast.com/t/Q4vyxIH8fFu
Hi guys! Based on this psbl inverted H+S, and + MACD div. , doesn’t this have a good chance of testing the 1330sh level?…..so far it’s like watching paint dry, though…so who knows
No Pomo today. Fwiw
thanks Mike…and sorry I didn’t see ur post at first…this dog won’t hunt, then
… need a different kind of dog …how’s NY?
nope, that’s not what it was.
Not there yet, next week. Winding down remodeling project here. (wife killing me) Keeping timeframes shorter now. Don’t get chewed up. I’m a better picker of bad stocks than anything. I realized a long time ago if I get long a stock it goes down. So that’s it in a nut shell. This chart is one I watch, but it can be flawed. Nothing is easy. Blind squires find nuts every now and then. Gl and nice rally gift last week.
http://stockcharts.com/h-sc/ui?s=$spx&p=d&yr=0&mn=5&dy=0&id=p34235188626&a=193878014
Excellent chart Mike. Thanks. I needed an attitude adjustment. That did it for me.
Enjoy ur project & ur trip!
Here’s what the recovery is all about. This is going on down state big time. Were in the wrong game. Lol
From a blog post, sorry no name.
Bill,
Thanks for the Hanson information on real estate. What a complete mess.
I know a guy in Atlanta who was busy buying rental properties all through the 2000`s. I spoke to him last week and of course most all these properties are now “upside down”.
But rather than just walk away he told me he has been doing “tactical foreclosures”. He has renters in place but has stopped making his mortgage payments. He has retained a Real Estate Attorney who is purposefully doing everything he can to delay and drag out the foreclosures process.
All the while he is keeping the monthly rental payments. The Attorney has averaged about 30 months in delays on each foreclosed property.
He told me at 30 x $1,800(avg rent)= $54,000 he is doing just fine, even with the legal fees, when he finally turns the keys back to the bank. He said most all of these were “liars loans” with no down payment.
He is making a living at defaulting! crazy….crazy times…
One thing I don’t understand is if someone is questioning the validity of their mortgage (which I guess they are doing when they stop making payments) then the whole real estate transaction would seem invalid b/c what was their basis for being in possession of “their “property in the first place …I mean did they get a gift from the bank or something?…the real estate contract should be invalid due to lack of consideration, I’d think, if there was no valid mortgage accompanying it. And if the foreclosure process has been flawed, then a bank should be able to stop it and make a new filing, no?
http://screencast.com/t/rlvsaM3EnkAL
btw, Mike, we’re working on yet another inverted h+S , on 15 min timeframe now
1312 broken,so we are in C wave much earlier than my prediction which will continue throughout this month.Enjoy volatile bear month and remember last time what happened in june’10 and after that.
Market looks like in hurry,2nd wave which is going on will now be flat as we nearly fully retraced (i)st wave.so (iii)rd of this 2nd or B wave will go to 1350 kind of level next week.then the big 3rd or C wave will break 1312 and take market to 1250 level.As predicted market may not take that much time to complete this 4th wave started from 1371.It may be in early july like last year.
Joy would you go long on the close tomorrow to ride the wave back up to 1350.TIA
A few weeks ago I mentioned that the OEX put/call ratio set up was very similar to January 2010 which led to a 9% correction. Here are my thoughts as of this evening. GLTA.
http://equitybriefcapital.wordpress.com/
Hi Tony, last Autumn you posted a projected wave count for the S&P, would you mind updating that or sending me an email with the updated count? Thanks
Welcome Pantunovic, Have not updated the report since April 4th.
http://caldaro.wordpress.com/2011/04/04/spx-bull-mkt-projection-update/
Thank you. So it appears you do not think there will be a bit more short-term downside? The majority of charts look poor right now. Also, I wonder what “uncle point” on the downside would change your expectation for a couple more years of upside? Thanks in advance
Hi Pantunovic, Only a drop below 1100 would turn things really negative.
I own a company that provides building maintenance and cleaning services to residential (homeowners) and commercial (business owners). Our business was moving along and growing at a brisk year over year triple digit growth clip until the end of March. Since then, our residential business has fallen far below the projections we had made based upon 2010 and 1Q2011. Commercial business held strong a bit longer, but has slipped remarkably throughout the month of May. This feels a lot like 2008.
My own opinion is that Bernanke & Co. had the cause of the recession entirely wrong – it was not the sub-prime debacle and the financial crisis. It is simply that the US economy really cannot sustain growth without a strong consumer, and that a strong consumer is not possible whenever gasoline averages above $3/gallon. If I had to pick a tipping point, I’d say $3.15 for regular is the line in the sand between growing consumer spending (on goods and services) and declining consumer spending (on goods and services).
I was completely on board with you Tony since the day I first found your blog back 2006. I still am, of course. However, I am leaning toward your “way out” alternative count that had the bull market ending with a weak wave 3 and an even weaker wave 5 which you proposed a few weeks ago.
In other words, a funny thing happened on the way to the bull market – the bull was prematurely slaughtered by hypertripecunia gasoline, aka three-plus dollar gasoline.
This is, of course, all conjecture and speculation on my part. I was very confident in the bull market through early 2012 scenario until our preliminary April sales numbers started rolling in around 4/15. My confidence is now much lower. In fact, I have doubled my advertising budget for the remainder of the year in anticipation of further weakness.
Good trading, investing, and income to all!
And thank you, Tony, for your wonderful selflessness! Other than my charts, your blog is the only daily must read for me at the end of the day.
“My confidence is now much lower. In fact, I have doubled my advertising budget for the remainder of the year in anticipation of further weakness.”
while many businesspeople tend to worry excessively during recessions, reduce their ad budgets , stop going to trade shows, etc. others, like you, intensify their efforts and , hopefully, get new business. Recessions are actually a great time to start a new business or get new business, aren’t they? GL with ur venture and thanks for giving us ur views! Very interesting! In a way, our wall of worry continues…and the Fed and its partners in crime will have to continue their liquidity measures, which have been the main driver of this bull market (or this “faux” bull market, if we assume that the economic recovery so far has actually been a fiction).
I like ur business approach, BreakoutPullback…
Hi CB,
Nothing “faux” about this bull market, that’s for sure! The recovery and profit growth in my own business from the 2008-9 trough through 1Q2011 has been remarkable, as it has for many companies, public and private alike.
However, fuel prices seem to have landed a body blow to this economy, and its knees are wobbly. Whether this becomes a full-blown recession or not remains to be seen. But I am going to act as though it will.
As you noted, I too have found that during recessions it is better to spend more to acquire new customers, even if it means profits are flat, than it is to pullback on marketing/advertising. I made that mistake once – the result was lower sales and operating losses. It may cost more per dollar of revenue to get that revenue during the recession (lower margins), and profits will likely drop, perhaps precipitously. However, I’ll take a small operating profit over an operating loss any year of my life. Once the recovery gets underway, those new customers added during the tough times will help fuel margin expansion and increased profits as old customers resume or increase their spending.
I hope the economy continues to expand, but I must act on what I see, not on what I hope. And what I see right now strikes me as a more severe slowdown than a mere “softpatch.” In May 2010 – July 2010, we hit what I consider to have been a soft patch. Business activity remained fairly stable, but without any recognizable or measurable year over year, quarter over quarter growth. This time, business activity is slumping. Big difference between a soft patch and a recession, and this downturn has nascent recession writ all over it.
Great long-term thinking, breakoutpullbak. Now is a terrific time to lock in as many customers as you can for as long as you can. Btw, you have a knack to explaining very clearly how a business operates…have you ever considered teaching kids in business school?.….they need lots of good case studies….
Tony, you have such terrific traders & entrepreneurs here…what a great place to learn about business and markets….thanks Tony!
“Haaa. It’s been said that I’d talk to a stop sign” …LOL, Lee, you ought to try it sometimes…. And let us know who gave up first, Ok?…
Thanks for your thoughts, Ryan of EBCapital Mngt and Joy!
Thank you Breakout for your assessment of the consumer. Today’s action would certainly support your scenario. But just like yesterday, one day does not make a market trend. The average consumer has been negative since 2008. The U0fM Consumer sentiment has been quite clear of that. Best of luck in your business!
Hi Tony
Have a question from your comments yesterday – like I said earlier – I’m still learning. You said yesterday’s trading confirmed the downtrend – is that because we traded higher and you anticipated a bottom was in? Apparently, 24 hours later, things look substantially different – much easier looking backwards!
Welcome Rick, We were expecting an OEW downtrend confirmation and got one. No that doesn’t mean a bottom is in, just the opposite … the trend is down. Short term we speculated on a possible bottom … that did not work out.
Thanks Tony. So, is this a confirmed Medium term downtrend as of today?
Hi CB … yesterday.
Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!
Thanks Tony !
They wiped em in SI today also.
U guys get ur stuff together or else I’m going to stop my paid subscription here. Oh wait ….:)
Fun day! Not profitable, but fun! Thanks for all the cheap entertainment. Back for more tomorrow. Almost unleashed the margin account today. I need to see sub 1300 for that. Maybe tomorrow?
cheap entertainment is right ! Haaa
It’s been said that I’d talk to a stop sign
tomorrow? Is that what everyone is thinking? B/c if that’s the case that means that nobody is in $spx/or everyone is short
( trin 4.42 @the close), which means that we ar going UP tomorrow. Geez, what’s wrong with me today…long at the close and losing 0.20 a piece so far ..must be that solar eclipse today..scary stuff…
I get that paid stuff from Dr P. That some ugly p and l if you trade it, useless.. Trying to vac and attend a graduation in NYC . Hick allert you Hampton boys… Fire Island and Palasides IBM, and I thought it was a teck company that gets 50 percent of rev from goberment.
Lee, Still have my real chips and chunks, but not active here. Gl
http://elite.finviz.com/publish.ashx?t=SLV&ty=c&ta=st_c,sch_200p,sma_10,sma2_144,sma_55,sma2_20,sar_0.02_0.2,rsi_a_5,stofu_a_5_5_3,macd_b_12_26_9,adx_b_12,perf_b_BAC_GLD_BNO_UHN_SLV_CORN&p=d&s=l
Funny Lee