Dow +28.34 at 8799.26, Nasdaq -3.57 at 1858.80, S&P +1.32 at 946.21

Flatline Under 1% moves on the major indices this week - have the summer doldrums come so soon? Maybe more likely that this is the calm before the storm as tight consolidation results in expansion. The one move this week was crude oil closing up over 6%. The tight range in the general markets shows that there is still good support and anxious buyers and the shorts are not able to get any traction and minor dips are being bought.  When the buying happens at the end of the day it is generally considered bullish as funds often buy late in the day however, now it has become so common that much of the last hour buying is more likely program trading that just keeps playing the same game as long as it keeps working. At the same time, traders buy in front of the last hour to ride the move up. One day there will be no last hour buying, or it will fail and then all those who bought expecting to take the ride will have to sell and that may cause a last hour drop that will build on itself as everyone heads for the same small door and this could begin a larger pullback. The bulls, though unyielding are not terribly aggressive and cannot get much going. This week the Dow broke above its 200-day EMA for the first time in over a year but the buyers could not hold it into the close.

This week ends in options expiration so there may be more than usual amount of market manipulation. With the quarter and first 6-months of the year ending soon there are money managers that want themarket to close out at the highest level possible. At the same time, for this week there are those who wish options to expire worthless. What is now called Max Pain is the assumption that most of the call or put options associated with an index or equity will expire worthless. To do this the underlying instrument has to end the week somewhere above most of the open put trades, yet below most of the open call trades. The current June Max Pain for the QQQQ is 34 and it closed Friday at 36.64 so the pressure here is to the downside while the end of quarter buying pressure is to the upside.

The Commerce Department’s trade balance report showed a widening of the trade deficit, as expected. The trade deficit widened to $29.2 billion in April, with both imports and exports declining. The decline in exports was broad based, but in small magnitudes. On an inflation adjusted basis, the trade deficit was $40.5 billion, which is better than the year-ago’s deficit of $57.5 billion. With the inflation-adjusted trade deficit being smaller than the average for the first quarter, trade may add about 1 percentage point to GDP in the second quarter.

The oil inventory report for the week ended May 29th showed a 2.9 million barrel-increase in crude oil stockpiles to 366 million barrels. Inventories were above the upper boundary of the average range.
 

Retail sales showed a notable increase in the month of May, according to a report released by the Commerce Department on Thursday, although the increase was due in large part to an increase in gasoline prices that drove up sales at gas stations. The report showed that retail sales rose 0.5 percent in May following a revised 0.2 percent decrease in April. Economists had expected sales to increased by 0.5 percent compared to the 0.4 percent decrease originally reported for the previous month.

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Initial jobless claims came in at 601,000 for the week ended at June 6th. This was down 24,000 from the previous week's revised level of 625,000. The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations in the data, dipped to 621,750. Continuing claims, which measures people receiving ongoing unemployment help, pushed further higher, setting yet another record by rising 59,000 to 6.816 million.

Import prices rose 1.3% month-over-month in May compared to a downwardly revised 1.1% growth in the previous month. The increase reflected an 8.3% increase in petroleum import prices, while non-petroleum import prices were up a mere 0.2%. On a year-over-year basis, import prices were down 17.6%.

Major indices for the week:

The best and worst sectors for the week:

Our multi-index chart shows that there was little movement in the price action however, of significance is that by going sideways while the Bollinger bands continued to climb there is now room to the upside before the top bands are again breached.

The Dow weekly chart shows the Fibonacci retracement from the Autumn 2007 high to the March low. The 38.2% retracement line is just over 9400 and is still a valid target for this bear market rally

On this Dow daily chart you see that on Thursday the trading exceeded the red line for a short time which is the 200 day EMA.

On this 60 minute chart of the Dow you see at the moment it is in a bearish range. We have labeled it with a possible five waves shown. As the weekly high at 8875 was above wave three it is a valid wave 5 however as the move was so limited it would be unusual for this to mark a short term top. What would be more common is a larger move to end this phase of the up cycle. Note that there is negative MACD divergence which is common when putting in tops.

This is the Dow using our Renko chart as we do with GDX. The latest sell signal was  December and buy signal was March so it caught almost the entire move up so far.

The Dow Jones utility average closed the week at a multi-month high. A breakout here could take it to test the 50 week key and a 379.

The Dow Jones transportation average index, like the Dow has been consolidating under the 200 day EMA.

The weekly NASDAQ chart shows the index back at it 38% retrace.

On the daily NASDAQ chart we see the bottom of the gap is just under 1900 and this or the filling of the gap are logical targets.

The NASDAQ summation Index and NASI is still pointing up but you will note it has negative divergence compared to the NASDAQ.

This weekly NASDAQ 100 chart shows that the major move basically started at the apex of the triangle drawn in yellow. This is quite common and something to watch for.

The NASDAQ 60-minute chart has a bearish wedge that was broken intra day and has now rallied back to the underside of this broken trend line as well as to the bottom of the small gap as shown. Because of its position if breaks under the recent low there will likely be more aggressive shorts waiting to sell the position.

The NASDAQ 100 to S&P 500 ratio chart shows the advantage that the NASDAQ had was weakened slightly on Friday and it underperformed the S&P 500.

We have not shown this chart in a while as not much had changed. This is a weekly S&P 500 chart with only 13 and 34 week EMAs showing. In general terms when the longer moving average is below the shorter one we are in bullish condition. You can see that they are moving closer together and while a crossover would be bullish we do not expect it to happen on this move.

The S&P 500 weekly chart shows the 50-week EMA is at  974 and a parallel channel trend line just above that. Although we have a target of near 1000 for the S&P move the level shown may offer greater resistance.

The daily S&P 500 shows how it is now fighting with the 200 day EMA and  if it breaks out has resistance at the November 2008 high atl 1007.

The S&P 500 60-minute chart as labeling similar to that of the Dow and although the fifth wave may not have yet put in a top, note that the move to it was on the same day of the apex of the previous triangle. Of course any move above the recent high is bullish and will extend wave five and a break below the lower trend line may start a significant pullback.

The New York Stock Exchange has closed above the 200-day EMA and has  resistance above as shown. It also has a pretty clear trend line shown in red and a breach of that could likely take the index back to the 50-day EMA.

This chart is the New York Stock Exchange new hires to two new lows  shown in blue and the New York Stock Exchange closing price shown in red. Note that while the New York Stock Exchange has exceeded its price high the new highs-lows have come in lower. This is not bullish and would be more common nearing a top.

This chart is the percentage of stocks on the New York stock exchange now trading over their 50-day moving average and is a bit lower than last week but relatively quite high. I think most would assume a break under about 70% would be quite bearish.

The Russell 2000 daily chart as it has for many days remained above the 200-day EMA and has resistance overhead first at 551.

This Russell 2000 60-minute chart shows a potential bullish flag. This week the Russell broke up over the top line however as it did not exceed the high of the wave three it has not yet put in a valid wave 5 so we would expect a move higher to complete the cycle. Note the negative divergence in  and a MACD and RSI which is common in the formation of tops much the same way that positive divergence is common in the formation of bottoms.

This week in the bond market saw the sale of $65 billion in bonds and particularly the 30 year bond had large buying interest. This interest moved the bond prices higher and yields lower. The 30-year yield reached a high of over 5% and closed the week at 4.6%.

This 15-minute SRS chart shows two trades in the last three days using the Ninja mechanical,  a long on the EMA crossover on Wednesday and a short on Friday both producing attractive gains.

The London financial Times FTSE is also hovering around the 200-day EMA and is   in a triangle and a break to the upside could take it to resistance at 4675.

The month is not yet over but the Russian trading system RTSI monthly chart at the moment has a reversal candle.

The commodities index CRB broke out above the 200-day EMA a and then pulled back on Friday. A continued move will have a target of 278 as shown

Crude oil monthly chart shows the clean break above the 38% retracement and horizontal resistance on this monthly the next major resistance is at the 50% retracement at 79 or in the peak labeled at 7986.

On this daily crude oil chart we also see resistance just overhead at the yellow line. It is very overbought so a top will soon be made.

The Big Mac Index  shows the price of a McDonald's Big Mac in various countries, as a crude way of measuring the purchasing power of various currencies. Here Gregor Macdonald has taken the idea in a different direction, looking at how many Big Macs you could buy for a barrel of oil, at average prices throughout the year.

Says Gregor: "Two aspects of this chart surprised me. First, even as oil began to take off in 2004 there was still a trailing stability in its relationship to the Big Mac. A barrel of oil could still be purchased for less than 15 Big Macs throughout much of 2004. The second insight I gleaned from this chart is that despite the advance in the price of the Big Mac since 2001, and equally despite the spectacular price crash of oil from the highs of 2008, a barrel of oil still costs nearly 20 Big Macs. In some sense, therefore, we can think of Oil as having moved from a previous pricing era of 10 Big Macs, to a new era of 20 Big Macs."

US oil fund USO has resistance at 42.56 and then the 200-day EMA at 43.33.

The goldl weekly chart showing the two week old pullback as it nears the center Bollinger band near 930. The reverse head and shoulders pattern is evident but not the time it would break out.

On this daily gold chart we see several areas of possible support. The first is the 50-day EMA at 933 then the first line near 920 and the converging trend lines near 900

The Gold cloud chart has the top support at the top of the red cloud just over 930 and the bottom support near 900.

The gold ETF GLD is nearing its 50 day EMA and at 91.65 a break there could eventually take it back to the 200-day EMA.

The Gold and Silver Index XAU has almost returned to its breakout level and near the 50 day EMA a 140. A lower support would be at the 200-day EMA and trend line just below it.

GDX Renko 60-minute chart gave a short-sell signal a couple of weeks ago and continues to build nice profits. We have used this since 2008 but one of our subscribers back tested it for 2007 and even in that year it produced a return of 75% and a compounded return of approximately 95% over the year and this was totally mechanical.

The GDX candlestick chart as it is now at the recent breakout level and near the 50 day EMA.

Silver has returned close to its breakout level and just under the center Bollinger band a lower level would be near 14 or the 50-day EMA.

The US dollar has been back and forth but it's been unable to top the recent high. On Friday the Japanese finance Minister said his nation's confidence in the US debt is unshakable and that he sees it as safe. Of course the Japanese do not want to have the Yen get too strong as they want their export prices to remain competitive. The longer-term threat to the US dollar is that the administration may prefer to have a weak dollar thinking that it will provide better corporate sales abroad while not keeping a close eye to the greater damage it does to the economy and US citizens long term.

The US dollar daily chart still has positive indicators and does have a chance to rally again from this trend line and test the declining 50 day EMA at 82.

Butch Cooley Comments (Butch is founder of Leg Up House and the Butch Cooley Worldwide Hunting and Fishing . He has been an active trader for decades.) Market Comments The Fed has been having some problems lately, with their attempt to put a cap on consumer borrowing rates, and their attempt to get the economy running again. In short, getting banks to lend money at as low an interest rate as possible. Part of the problem has been T-Bonds, and the wild ride they have taken. Volatility in bonds has been really high for the last 6 months. And the yield in the past week rose to above 4% on the 10 year. It did settle back down a little, but this does illustrate the next problem for Bernanke. The 10 year is the bond rate that sets mortgage rates, for those who may have forgotten. You all do remember mortgages right?? I checked two weeks ago on a fixed rate mortgage at 15 years and it was just about 4.9%. I am currently on the road to Florida to take a look at investing in some distressed properties. But as of this morning, my rate has jumped to 5.85%. This is a pretty big jump in just 10 days. This is higher than it was last November/December 2008. So what the heck is going on anyway? Well, bonds are a bit complicated, but the problem they are causing is pretty simple. Bond yields are increasing on the 10 year Treasury. Consumer borrowing rates, that's us, is up. And the price swings in the T-Bonds is making bond trading just a little uncertain. Now, this is not what Chairman Bernanke was after. He was attempting “quantitative easing”, remember? The volatility is basically coming from the uncertainty about where or not the Fed will increase purchases of Treasuries. The markets like to be ahead of news, so they are looking for some change forthcoming. And that makes the markets uneasy. It also means it's costing more to borrow what little money is available to us. Quantitative easing, in a nut shell, is when the Fed “prints” money out of thin air and injects it into the economy, in our case, through government stimulus and direct injection to the banks. It's rarely used, and most often when Fed interest rates can't be lower. Right now, those rates are about 0% and it's pretty hard to go below zero. In this day and age, the Fed doesn't really print any new money. They simply invent the money on their computer and make an electronic transfer to to the Fed accounts. The simple problem is Bernanke is attempting to stimulate the overall economy by printing money, lots of it, close to $14 Trillion currently.... but then is buying back the Treasuries to cover the debt. I just don't see that working well. Not at the moment. Now what the Fed is saying interest rates are up because of the rosy outlook lately that they are trying to paint about the economy and that things are stabilizing. That and the fact that our current Administration budget deficit is about to exceed $1.8 trillion . Again, this is money we don't have, and no one seems to be really interested in buying debt through T-Bonds. The last few auctions have not gone well for the Fed. So they are stepping up and buy a lot of these treasuries when they go on sale. But the Fed claims they see no reason to increase their purchases of bonds. And the bond traders aren't buying that right now. And the Fed also claims a .05% expanded economy by the end of the 3rd quarter in 2009. And the bond traders aren't buying that right now either. So it's a tough market for them, and hence the volatility. We have been in the so called housing slump about 2 years now. But most agree, housing is the trigger that fired the canon that launched us into this recession/depression. And it would seem that lower interest rates would be a catalyst that would be absolutely necessary to get housing fired up again. And why wouldn't it get fired up? In July 2006, the means price for a house in the US was around $230,000. Now it's below $170,000. That's over 26% decline in housing prices. Certainly not good if you are selling, but really nice if you are a buyer. In April the National Association of Realtors claimed signed contracts to buy previously owned housing was up 6.7%. Ok, that's a signed contract, and it does not mean a sale took place. The Mortgage Banker's Association keeps an index on applications to purchase and/or refinance. That fell 16% at the end of May. So it would appear that higher interest rates are putting potential buyers on the side lines. And this is not what the Fed wanted. Now as interest rates increase, and I am talking mortgage rates now, then in order for buyers to still come out and buy housing, prices need to go down to equalize the payment that the borrow is going to pay. So far, that is exactly what has happened. Interest rates went below 5%, and housing prices are down 26%. So why aren't buyer running out there and grabbing some of these great deals? Maybe they are waiting to see if this is really the bottom to housing? But more than likely, they can't qualify for a loan, and that loans themselves are pretty scarce. Remember, the whole point to quantitative easing is to get rates low, keep them low, and stimulate lending. The simple part here is the banks are not lending. Yeah, a little. But mostly the banks are sitting tight on TARP money. Now this was also the week that Treasury and the Fed agreed that 10 of the 19 banks that are “too big to fail”, have permission to pay back TARP funds. At the time I am writing this, I don't believe any of those 10 banks has paid back the funds. A few smaller banks have already paid back their money, but it was minor to begin with. I don't think the big banks are very interested in lending right now. They are interested in surviving and keeping their really nice jobs. In short, I think the banks have basically said to Treasury and the Fed, that they just don't want to be bothered by all these regulations and oversight. And much that is written about these banks has to do with paying bonuses, not lending money. They have thumbed their noses at the Fed and Treasury, and they don't want to play by the rules these agencies are setting up. One of Bernanke's biggest errors in my opinion was to even issue the statement, numerous times, that there even were banks too big to fail. Those same banks took TARP money to survive, but now want absolute control as to how they run the business that “taxpayers” helped to fund. I have trouble with that taxpayer financing anyway. Do you actually think as a taxpayer, you own any stock in any of these banks? And don't you think the banks know that? We acted very fast, too fast, on bailing all of these banks out. And we didn't have really good controls in place. Once the banks had the TARP money, the Fed just assumed they would lend it. Well, they didn't. So, if interest rates rise, if inflation does come to bear, sooner than later, Bernanke is in a hole he dug for himself. But his hole effects our yard. If rates don't stay low, then housing doesn't jump start. If banks refuse to lend, nothing gets better. In fact, it gets worse. And the only option open to Bernanke is to print more money, and add more quantitative easing to a situation that has not improved to date. Good money after bad. The end of this equation, is any recovery that might be beginning to form is stymied. Eventually, inflation becomes a huge issue, and the major tool for the Fed to curb inflation is to raise rates. And that is the conundrum.   BC

 

Here is a list of stocks reporting earnings on Monday before the open. Check the updated Earnings Calendar 

Weekly economic calendar from briefing.com.  Monday has the Empire State index, Tuesday Housing Starts, Building Permits, the PPI and Industrial Production. Wednesday has the CPI and Current Accounts Deficit. Thursday the Weekly Jobless Claims, Leading Indicators and Philly FED. Friday is  Options expiration. Member of the Fed will have a talks on Monday, Tuesday and Wednesday.
 

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Featured Company News

There were no news items for our featured companies this week.

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Note on the site pages on the top menu we now have Live Charts. These update themselves and we have several of the popular Ninja Trading mechanical trades that many have used over the years. We also have FAZ and FAS in 15, 5 and 1 minute variations as well as The Dow and others. They do dot yet all fit on the menu so look on the SRS 15-min chart on the top right menu. We have also added free image hosting to the Extras menu.

 

New additions to our watch list. We add many stocks to it each trading day.

 

 ORA  Over $41.77

ARG  Possible short under $39.80 bit may be a bounce also

ACS  Over $46.50 and 200-day EMA

UPL  Over $50.00

BKH  Over $23.28

EW  Over $66.85

GILD  Over $45.50

BTU  Over $37.00 - high was $37.44

L  Over $29.00

CROX  Back over $4.25 then $4.50

FRX  Over $24.70

For your eyes.......

 

Photograph by Vasilili Golubev

 

 

Photograph by Sergei Shubkin

 

 

Photograph BlueWorld

 

 

That's a full lid for today - have a great week.

Check the Earnings Calendar on all overnight holds.

Check the current message center also for other good stock candidates as there are several there right now.

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