Trading Ranges

Low volume rally continued through yesterday with NQ100 once again trying to lead the overall indexes higher. Bears have been slowly ground up this week with no follow through from last Friday's weak close. DJI has become the dog with the SP500 running a close second. News about oil is going to play constantly but it may be in range bound land for awhile. Just when these indexes look to be at point of bear or bull joy, they quit.

Summer Is Here

Markets continue volatility dive and even when hard breaks appear the action is thinner. Summer has set in and range bound trading will be the feature through July at least. Election year talk will become a bear focus especially if downside objectives become hard to reach. Bulls will use the historical data that markets tend to do well in inflation patterns and much better under Democratic than Republican administrations.

Early Rally

Early rally today a follow through from yesterday's modest gains. Gloom and doom of last Friday's close and market attitude certainly set up conditions for a short covering rally. NQ100 leader once again which is a positive if it can hold. DJI and SP500 need a significant pop to convince many there are any legs on this action.

Bull Bear Notions

DJI is approximately 155 days and 11% off it's all time high with bears insisting current value does not reflect the magnitude of economic distress prevailing today.The usual bull market salesman who frequent cable market news channels are quieter these days, but like the bear extremism of late, both use index prices too often as direct indicators of total economic activity. Dollars spinning around in the speculation and investment in market indexes represent notions of value many times outside daily economic readings. The bears are obviously disappointed the DJI, SP500, and NQ100 are not hovering slightly above zero just as the bulls are frustrated with their inability to achieve values from contrived formulas projecting ridiculous upside targets. The bears need to stop looking for a crash and the bulls need to learn how to trade.

Bear Raids

Bear raids on lite volume story so far today as indexes become extremely oversold. Three day weekend will reveal little in the way of new insight. Bears sees markets not reflecting the hits the economy is taking. Bulls see value pegged to future demand for investment and the tab for bad trades already picked up by the Fed.

Fine Whining

Indexes traded in the smallest ranges of the year with added volume on some pricing. Oil and inflation still the items of market concern with Bill Gross of Pimco stating inflation has been understated for some time. No kidding? Oil executives on Capital Hill testified high oil prices were a result of the forces of supply and demand. They warned against governmental price intervention and said things would get better if they were allowed drill for oil anywhere they wanted. They do not guarantee that would bring oil prices down but it would insure their ability to continue taking governmental tax subsidies which is what they really mean by the forces supply and demand. These oil executives, like so many of the trading operations on Wall Street over the years, have become experts on taking, and when not taking, whining about not taking. In their minds, economic theory holds that if you take away the ability to take advantage of governmental support, one creates a whole lot of whining. The farming industry just got their 'taking' package in the form of a new Farm Bill. Good thing we avoided all that whining.

Bears hope to use the end of the three day weekend as the tipping point for much lower prices this summer. Bulls have had a slam and need the break to stall here or face a trending lower range bound dog.

Pounding Markets

Post Fed Minutes action gave sellers new strength yesterday as the DJI, SP500, and NQ100 all got pounded. Oil rallying helped the bearish chatter with continued belief in Goldman's and T. Boone Picken's predictive powers. Calls for some type of action by Washington to stem the gusher seems to find no ears in an administration tied directly to the oil industry. Of course exactly what could be done is not clear since the only real hammer would be to declare a 'liquidation only' order for all futures contracts by the CFTC and of course pigs fly. Others talk of declining open interest on the current oil rally as signs even the shorts have given up. They are right but neglect to point out however declining open interest on rallies is classically bearish because by it's very nature is topside liquidation, strong longs liquidating to weak shorts.

Stock bears now see this move as vindication of a market overdo for substantial price declines. The bulls have to now face a market without the hope of further Fed action and general lousy economic data. Range bound action will continue to be the backdrop for every over-reaction.

Directional Arrow

Decent sell off yesterday with the DJI and NQ100 holding just above key levels. Oil prices are blamed for the weakness in indexes as assorted calls for higher prices come from those with a positional self interest. Goldman calling for a super spike to pump it's own massive long position is certainly a bubbleland event. But those are the travails of the stock bulls even as they hang on to the greater portion of this year's rally. Friday's close in front of a three day weekend will be an effort to point a bull or bear directional arrow on summer but will have little to do with anything. The bull is closest to breaking out of the four month range but the bear has certainly become the majority view.

Today's Test

Both bulls and bears finding small victories in yesterday's action. Today's early action seeing pressure from PPI data. Bears need a failure a some proportion to damage prices before the three day weekend. Bulls just need to defend lower part of upper range. Jan 4 close line still key areas for DJI, SP500 and NQ100. They are 12800, 1423, and 1985 respectively.

Rally On?

Here the markets sit after climbing near the top of this year's range, and though they look a bit winded, they have continually marched over bear preachings. Tech has the look of a leader but let's face it, it is always where the weakest hands are. DJI is perched to move higher but has not taken out this months highs. The spot SP500 has just over fifty points to rally to get higher on the year but it may be the toughest rally all year.

Peering over the second half of the second quarter the markets are usually at a point in an election year where all the candidates begin offering 'elect me' incentives. But this year, with expanding credit crunch talk and talk of $5.00 gas prices by labor day, this may be the point where the bulls start feeling the front of the line pushing back.

Powers Of Intervention

SP500 futures finally closed over 1423 and now should be poised to extend the rally with the DJI and NQ100. The caution is that the rallies have lousy internals, leaving a greater chance for reversals. Like all things in the current market environment, there is a great suspicion of all price activity. Wall Street has done such a bad job at determining value but a great job at accepting welfare. The bears claim there are greater forces than the powers of intervention but since March have been unable to demonstrate downside energy.

Turned Back

Once again the SP500 futures turned away a top of range and with end of week action becoming a battle for the rest of the quarter. Yesterday's early rally was quiet but the sell off saw a pick up in volume. NQ100 needs to hold over 1985.

Climbing 1423

SP500 futures trying to confirm the final base action with a test and close over 1423. DJI and NQ100 have over come their Jan 4 bear line closes and only a reversal lower today would spoil the rally points. Fed continues to grease the wheels with accommodating language and continued pricing has stocks, despite low volume, building a base.

Feds Lift / Bears Lean

SP500 is currently the laggard on a relative strength basis with a need to close over the Jan 4 bear line of 1423. Fed is providing all the encouragement and the added element of election year posturing about more stimulus is putting the bear in a defensive position. If there is too much weight to lift however, the SP500 will be the leader down and the DJI and NQ100 will follow.

Breakout / Breakdown

Work continues with the DJI, SP500, and the NQ100 trying to work some type of breakout or breakdown confirmation as overall markets have entered a period of less volatility and smaller ranges. Recession length, oil prices and the dollar get the most coverage but are used as headlines to blame modest swings in daily price action. The real directional news will come from campaign contestants and Fed proposals for more intervention over the coming weeks.

Bear Close Line

The NQ100, DJI, and SP500
against the Jan 4 bear close line.

Bear Macro

Indexes had a decent sell-off today of which most of it was blamed on higher oil prices. If higher oil prices were really the reason, stocks would be a zero by now. As mentioned in previous posts,
speculation in commodity markets has been one of the major reasons for stock market resilience. Speculation is the black sheep of the investment family and always is an indicator of money's willingness to play. If and when stocks and commodities finally couple together on the downside, that ride would be an unpleasant event. Stuck in a range is the present reality with a bear macro economic view balanced against the bull side micro efforts of the Fed and others.

Today's Market

Indexes trying to set up for rally leg but have stalled at the upper end of range. Dull can become a main feature quickly even if the market rallies from here. The housing market woes have yet to provide the bears with any velocity as the macro story has been out there for some time. Bears will need a surprise downside move to gain any attention.

Higher Close

Indexes fought off early weakness and closed on their highs. Bears growing a bit uncomfortable with the markets ability to find little selling at lower levels. Taking out last weeks highs in the DJI, SP500 and NQ100 will create some upside horizon for managers if they can close the week strongly.

Why, You Heard Something?

In the previous post, Bernanke was mentioned as not wanting to be the guy in history who looked liked nothing could be done. He continues to work feverishly to build work-arounds for the debt related network of woes, especially in regards to housing foreclosures. In a NY Times article describing his efforts to have Congress deal in an innovative manner on the particular problems driving foreclosures this time around, you get the clear feeling Bernanke knows something about the severity of the debt crisis that the stock market is just not getting. Now whether he is trying to preserve the buyside inclinations of an idiot public or the ever stranger bullish excuses coming from market television coverage, the absolute complacency of market participants is odd. Bernanke's own Fed efforts have provided some cover for the bulls, but that only explains part of the story. Even through the ugly breaks earlier this year, market participants have viewed it all as an opportunity to add on or at least hang on to positions. The fact is, there is enough investment money around to heat many markets. As long as commodity markets roar, there is investment wonder. For the bulls, they believe the break is over. For the bears, it will be hard to get traction without a commodity crash.

Market History

Start of another week with the three indexes DJI, SP500, and NQ100 looking to news of MSFT and YHOO deal off the table for now. The tech stocks have benefited the most in the last two weeks which is what the overall market needs to have a quality rally. Any head winds now will come from the relative strength of the SP500 as it tries to confirm the base building.

Still supportive solutions coming out of the Fed as it tries to provide liquidity. Criticism about the bale out of Bear Stearns is hitting the speaking tours. It is clear Bernanke and NY Bank Geithner were not going to let the crisis paint them in the history books as anything but accommodative. Bernanke may not have discovered some secret formula for economic recovery while studying the Great Depression at MIT, but history loves men of action and there is a better chance of being seen the man of the moment if you are doing anything rather than doing nothing. One thing boomers have learned is that at all costs, look good. Face lifts, jogging, and bale outs help. Everyone knows the direct results of baling in this case benefits the large eaters, and the rest, well the rest have to figure it out and do the best they can. The business banking/trading culture, as revealed, is a fairly untalented group, they get saved.

Digit Madness

Trading expectations and the news are the meat of perceived value in all things traded. Today's job number is a example of 'digit madness' , where meager measurable economic movement is the catalyst for price play. But it is in the actual price mechanics where the battle will unfold and whether the bulls may be able to parlay meaningless data into a short covering romp. Price plays are always subject to the continued ability to move the trade position pile, making the other side pick up and move in one way or the other. The January 4th close and the subsequent break, marked a rejection of the larger bull trend in the three indexes, DJI, SP500 and NQ100. The DJI used that Jan 4 close yesterday as a low to vault into the current rally config. The SP500 and the NQ100 will either do the same with their Jan 4 closes, 1423 and 1985 respectively, or find them the dipping point of this rally.

Close To Claiming Bottom

Why wait for the Job's report? A run on the NQ100 made the tech specs as happy as a repriced stock option. Bargains abound in this Fed led environment, so it is believed, and managers are not going to miss a chance to look smart. With launch mode indicators on green, a powerful rally on Friday could leave the bears all but beaten. But you never know how these things work out and the NQ100 and the SP500 stopped just shy of the Jan 4 bear close. A run away reversal tomorrow on the other hand would validate the current weak market internals. But let's face it, the bears have their backs against the wall and will get little help unless today's rally was just a blow off top from the mid January lows.