Market Talk

We pointed last week to the $103-$104 area as a breakout range for Nymex crude. Well, as you can see it broke through that, holding around the $105 level this morning. Having broken through that resistance wall, it appears to be headed higher.

The key level still appears to be this $103 range. It fell into that area earlier, then bounced back, and as of this writing it appears to be testing the level again (looks like two tests of it so far today.) If support there holds, Newswires’ Stephen Cox wrote this morning, crude will be headed for about the $107/barrel level, and ultimately to $127.

Don’t even wonder what that’ll do to gas prices. You’ll have more reporters than customers at the truck stops on the New Jersey Turnpike.

At the same time, the level to watch for on the DJIA is 12000, which represents roughly the uptrend line drawn back to the August lows, as noted by Dennis Gartman, who edits and publishes The Gartman Letter. Gartman wrote that the Nasdaq Comp may have already broken its uptrend line, and if the Dow closes under 12000, it’ll be headed for 11400.

Right now, stocks are surging, with the Dow up 70. They’re fighting. We’ll see where that goes; markets are very, very volatile these days.

I used to think all this technical analysis stuff was goofy, that there’s no way to boil a market run by human beings to a bunch of numbers. But I got to tell you, I’ve watched more than my share of these numbers get hit, and the market lurches up or down in reaction. In a world where most of the markets are controlled by computers, and those computers have these numbers programmed into them, it makes sense to pay attention.

How far can the Fed push the stock market by jawboning? We’ll soon find out. From our colleague and stocks technician Tomi Kilgore:

It won’t get any easier for bulls if the DJIA can get to 11000 for the first time since May 4, as heavy congestion between 11000 and 11200 during the second half of April suggests that will be a strong resistance zone. Bulls will also have to contend with the 200-week simple moving average (10988), which helped cap the DJIA in April. In addition, the 61.8% retracement of the decline from the October 2007 high (14198) to the March 2009 low (6470) comes in around 11246. The DJIA’s closing high in April was 11205. DJIA up 4 at 10949, off an intraday high of 10972.

Dow’s currently at 10949, up 5. I’ve been of the mind since early September that the bulls were going to push this thing to at least 11000, that the combination of cheap money, and the implicit promise of more of it to come, as well as the expected benefits of a more “business-friendly” political party taking over Congress would fuel a big rally that could last through election day. Of course, this whole Potemkin village is one choice headline away from falling apart; something, like, oh, say, Greece defaulting on its debt.

Right now, the bulls have got this thing by the horns; we’ll see how long it lasts.

- “I continue to believe this recent rally is a case of the banks dragging the rest of the market higher,” The Pragmatic Capitalism blogger says. But that optimism may be short-lived. “Keep tabs on the next few weeks of earnings season as strong earnings are likely being priced in as we speak,” blog adds. “More importantly, expect the weak economic data to take center stage as we get deeper into earnings season and bullishness returns.”

- Rumors of an Apple (AAPL) iPhone 4 recall are floating around the blogosphere, but analysts are convinced it’s a highly unlikely event. Analysts say the issue isn’t serious enough to warrant such drastic action. “Seriously, an iPhone 4 recall?” Digital Daily blogger John Paczkowski ponders. “Steve Jobs would rather recall hiring John Sculley.”

- Apple’s reportedly begun removing discussions about Consumer Report’s decision not to recommend the iPhone 4 from a customer response portion of its website. Apple has been known to remove or lock discussion threads before, drawing ire from unhappy customers

- Trading of S&P 500 stocks has reached its highest correlation since the 1987 crash. “I think it’s more of a sign of indecision, and traders sitting on their hands,” Barry Ritholtz writes at The Big Picture.

- Even though Windows XP has been around for nearly a decade, Microsoft (MSFT) now says it doesn’t have plans to retire it anytime soon. “Our business customers have told us that the removing end-user downgrade rights to Windows XP Professional could be confusing,” MSFT says on a company blog. It’s a pretty unusual move, but “with 74% of business PCs running XP, the move is more proof that it’s the OS that won’t die,” Gregg Keizer writes at ComputerWorld.

- Today’s FDA advisory committee meeting to evaluate safety of GlaxoSmithKline’s (GSK) diabetes drug Avandia is generating lots of buzz on Twitter and various health blogs. For a sample, try CardioBrief.org by longtime medical journalist Larry Husten, who’s posting updates with a touch of irreverence every few minutes.

- Research In Motion (RIMM) has unveiled a new, free application to enhance security for consumer users of its BlackBerry smartphone. BlackBerry Protect will allow consumers to remotely backup and restore data on their device, as well as locate lost or stolen devices via a desktop computer. The app, disclosed by RIMM on its Inside Blackberry blog, will be available in limited beta testing later this week and open beta later this year.

- “In decades of market analysis, I can’t remember a time that I’ve heard many analysts quoting some support or resistance level as being ‘critical’ for the market,” John Hussman writes.

- Stubbornly high unemployment rate gets lots of attention, but labor market’s fragility is evident in declining hourly wages, former labor secretary Robert Reich says. June’s decline in average weekly hours worked sent weekly paychecks down 4.5% at an annualized rate, he notes. “In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.”

- WSJ’s George Steinbrenner obit.

Dow Jones columnist Tomi Kilgore reports on some key technical levels to keep an eye on:

The Dow Jones Industrial Average has reached the key 9830-9880 resistance range, which is defined by the early-February, early-May lows. This area needs to be cleared on a closing basis within the next couple sessions or the bounce will look very much like a “dead cat.”

If the DJIA breaks through, the next levels to watch are 9950-10000, followed by 10150-10200. Since the underlying technical indicators haven’t been showing signs of outperformance relative to the DJIA’s price (bullish divergence), the odds currently favor the “dead cat” scenario.

DJIA lately up 153 at 9840. There should be minor support at the 9750-9775 level, followed by the 9610-9625 area.

US stocks take back yesterday’s losses, and most of Friday’s as well, led by a big rebound in energy shares (which led yesterday’s selloff, incidentally.) It’s a big move, no doubt — it was the Dow’s third biggest point and percentage gain this year, for example. But we wonder if this is just more market churning.

After all, what’s changed? Did BP cap the gushing Gulf well? Did Europe suddenly become a growth story? No, and no. Plus, there’s a very big jobs report coming up Friday, and there are signs, hints, indications, that private sector hiring in May may not match April’s levels.

What today really about is just churning volatility. DJIA jumps 226 (2.3%) to 10250, S&P 500 surges 28 (2.6%) to 1098, Nasdaq Comp gains 59 (2.6%) to 2281. That puts the Dow just under resistance at 10260, and you wonder if this is all just the market spinning its wheels (and giving traders something to do, and profit from.)

Energy sector surges; financials, materials also very strong. NYSE volume is weak, a caution flag for the bulls. There were a couple of decent data points today, pending home sales rose as did auto sales, but it’s hard to believe they were worth a more than 2% move. No, this is just more volatility.

US stocks bouncing around the break-even level after Friday’s dramatic session, with consumer discretionaries leading the gains after Hasboro’s (HAS) better-than-expected 4Q report.

With stocks flirting between positive and negative territory, it’s worth debating how long this recent correction will last. In particular, traders are keeping an eye on the S&P 500, which was down more than 9% from its late-January high through its intraday low on Friday, when a sharp late-day rally kicked in as buyers made early bets that a traditional 10% correction was nearly complete.

Based on its closing level, the S&P came into Monday’s action off 7.3%. But technicians are still on guard against a so-called “re-test” of the recent lows to complete the 10% pullback, which would take the broad index to 1035.

Also keep in mind the index tested and reversed off some key support levels on Friday, according to Kevin Lane, director of quantitative research at Fusion Analytics. “Weekly momentum indicators are losing momentum and are close to flashing some sell signals,” he says. But until near-term support is broken near 1026, “it is hard to get too negative.” Bottom line, “the trend is up and remains intact and only a move below the 1026 level would be viewed as a negative,” Lane adds.

Continue reading…

Market's stamina will face a stiff test today.

US stocks bounce at the open as better-than-expected earnings from Exxon Mobil (XOM), a larger-than-anticipated rise in personal income and strengthening manufacturing activity fuel the rally.

But keep an eye on the run-up’s stamina, as the stock market has portrayed an ugly pattern of late. Stocks have shown hefty gains at the open in recent sessions, only to see those gains drift away by mid-afternoon, putting any rally’s sustainability in question.

Dow rose as much as 119 on Friday, only to close down 54 – near session lows.  Same thing happened last Tuesday, when the index rose as much as 88, but eventually lost all the gains and finished down three. And prior to today’s action, the Dow was down 6% since Jan. 19.

“There’s simply no way to sugarcoat it,” Bespoke Investment Group says, as recent trading suggests stocks may have risen too fast, too soon. (The Dow rose 64% between mid-March and Jan. 19.)

The long-term uptrend is also getting close to breaking. “If the uptrend breaks, investors will need to reposition their portfolios, which ultimately puts even more pressure on share prices,” firm adds.

Continue reading…