.."yellow card'" for the market
Tuesday, June 29, 2010 at 07:12AM It’s become overly apparent the last 2-3 trading days, the only potential catalyst for the Bulls is potentially earnings season. Only problem is it really does not kick off till July 12th with AA, so far we’ve been noting there is no’ barometer’ type corporate report recently or upcoming to change this premise till 2 weeks from now. The idea stocks are cheap and pessimism abound may prove to be a catalyst in the making here. Until, what we’re left with is no reason for buyers to step up just yet, thus leaving room to meander and potentially break our recent set 1072 benchmark. The overall range low of 1040-1050 is still very much in play.
Today, volume was non-existent and a tight SPX range has drawn up a ‘technical’ triangle over the past few sessions. Even though light volume, a pre July 4th holiday week, end of Q are the perfect ingredients for an upside break to the upside most years, the individual stock action so far is indicating the opposite (downside break). In all honesty, downside may be the only alternative to get some buying and a trade into NFP# at least. Downside break here would not be that hurtful, if it continues to be a fast traders market where ETF’s are the only thing being traded. Afterwards, this may allow a short lived trade before or after the NFP if surprisingly positive. Hey… it’s better than any set-up we`ve seen for a trade in a long while. Not a single sector is worth a look/ trade recently, commodities are terrible showing some are not ready for a possible China PMI Wednesday to come down. This would be natural at this stage, but the market may think numbers go up forever and if not, it's all over. A smelly problem is one we noted before last Wednesday trade is the TSY action. Today, we set record low's in the 2 year and this de-risking is indicating something is fishy out there.
If this is only due to pessimism in regards to earnings coming, this can bring a quick reversal into risky assets (equities) than. If it's indicating something else, such as something Geo-political..more European mess..etc, we won't know till it's too late, so be cautious.