Not much of a rally
Steve Cook on Disciplined Investing

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The Market
    
    Technical

    After another volatile day, the indices (DJIA 9742, S&P 1028) ended in the plus column; that leaves them within their recently reset down trends (9241-10457, 988-1111).  Those looking for a ray of sunshine can take heart that the 9645, 1009 held once again.  Unfortunately, the early rally stopped dead in its tracks at the 9830, 1042 support turned resistance level.

    Volume picked up a little; breadth improved somewhat.  The VIX closed below the lower boundary of its recent up trend for the second day;  if it holds on for another couple of trading sessions that would reset its trend from up to a trading range.  That in turn would suggest that the recently reset down trend in the Averages is not apt to turn into a major flush.

    Bottom line: we couldn’t have asked for a better Market day to initiate the ‘lightening up’ moves by our Portfolios (see Saturday’s Subscriber Alert).  That said, after seven down days, it was not exactly unexpected.  Indeed, I thought that up 5 points on the S&P was a surprisingly weak performance.

    My focus today will be on gold (GLD).  It is hovering right at the lower boundary of an up trend.  If it bounces, our Portfolios will likely Buy more; if it successfully challenges that trend line, our Portfolios will probably Sell a portion of their GLD holdings. 

    Small wonder gold is up (short):
    http://www.ritholtz.com/blog/2010/07/half-of-234-years-worth/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29&utm_content=Yahoo!+Mail

    Three contrarian indicators (short):
    http://www.marketwatch.com/story/contrarian-indicator-offers-bearish-picture-2010-07-06

   Fundamental
   
      Headlines

    It was a pretty quiet day.  The Market bounced from an oversold position.  There is almost no economic news this week, so the chattering class was stuck endlessly analyzing why the Market was up, then down, then up again.  In between, it looked forward the start of earnings season which begins in earnest next week.

    Bottom line:  stocks are relatively cheap; this earnings season should provide some positive surprises.  Yet stock prices keep declining.  I believe that corporations as well as investors have serious confidence issues with the management of US monetary/fiscal policy; and until that problem is corrected, the best we can hope for is a flat Market.  Right now we don’t even have that.
         http://scottgrannis.blogspot.com/2010/07/corporate-profits-are-strong-but.html

Economics

   This Week’s Data

    The June Institute for Supply Management nonmanufacturing index came in at 53.8 versus expectations of 54.9 and 55.4 recorded in May.
    http://mjperry.blogspot.com/2010/07/ism-business-activity-index-show.html

    Weekly mortgage applications fell 2.0% (again):
    http://www.calculatedriskblog.com/2010/07/mba-mortgage-purchase-applications.html

    The International Council of Shopping Centers reported weekly sales of major retailers rose 1.0% versus the prior week and 3.9% on a year over year basis; Redbook Research reported month to date retail chain store sales up 3.1% versus the comparable period last year.
   
   Other

    The US long leading index (chart):
    http://www.ritholtz.com/blog/2010/07/u-s-long-leading-index/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29&utm_content=Yahoo!+Mail

    The recent trend in US government debt and the deficit (short):
    http://www.zerohedge.com/article/comparing-changes-quarterly-us-debt-and-deficits

    And that’s why there is no budget for FY2010 (short):
    http://www.zerohedge.com/article/us-ends-june-132-trillion-debt-adds-210-billion-total-debt-track-breach-debt-ceiling-under-s

    Observations on the EU bank ‘stress test’ (medium):
    http://www.zerohedge.com/article/after-repeated-facts-presented-stress-tests-are-scam-europe-relents-disclose-testing-methods

    Here’s more discussion on the need for balance between spending and savings in order to avoid a major recession (long):
    http://www.nakedcapitalism.com/2010/07/our-new-york-times-op-ed-on-the-corporate-savings-glut.html

    M2, velocity and GDP (short):
    http://scottgrannis.blogspot.com/2010/07/no-shortage-of-money.html

    Another transportation index that suggests economic growth (short):
    http://scottgrannis.blogspot.com/2010/07/shipping-update.html










Posted 07-07-2010 8:14 AM by Steve Cook