Here’s one read of the stock market action of the last two days.
Essentially what we’re seeing today and what we saw on Tuesday, June 8, is a resumption of the bounce that was demolished by the horribly disappointing U.S. jobs report on Friday, June 4.
Before those dismal numbers—just 41,000 private sector jobs added in May—U.S. stocks looked like they had held above the 1045 February 2010 low on the Standard & Poor’s 500 stock index and were headed for an oversold bounce. Nothing really long-term and unlikely to be strong enough to reverse the general downward trend—for that we need at least a truce in the euro debt crisis and an end to fears about growth in China—but a typical bit of bargain hunting as traders decided that stocks were cheap enough to buy in hope of a short-term gain. The thinking then was that the bounce could take the S&P 500 back to as high as 1220 or so. That would have been a very welcome gain of better than 10% from the recent lows.
That all got interrupted by the June 4 jobs news.
But now it looks like that pattern may have kicked in again.
The 1045 level held, roughly. Stocks look oversold, again. And as confidence increases among traders that they can make buys on the long side without getting wiped out the bounce could strengthen in the days ahead.
“Could” is an important caveat.
The last bounce got derailed by bad news. So could this one. And it’s all too easy to draw up a list of potential bad news for the coming week or two.
The first big Watch out! moment comes on Friday (another Friday, sigh) when investors get retail sales figures for May.
The April numbers were shaky with sales growing at just 0.4% after a 2.1% gain in March. If you take out car, construction supplies, and gasoline sales to get what economists call the core retail sales number, retail sales actually dropped in April by 0.2% from March. That was the first month-to-month drop since December.
Certainly enough possibility of a disappointment to make traders nervous enough to take profits before the Friday data. Actual bad news on Friday could interrupt the bounce again.
I will not pretend to be an expert, but what I see in my charts is
,, a small sell off, from here, or we base. And this sell off today was tied to UUP. Take a look at UUP and dia today, as uup down, dia went up. As uup turned up , dia fell. Now uup is very overbought on all my charts, and as it falls, I would think dia will start its long climb up, and with it the rest of the market.
Problem is UUP has a big mass of support so any rally in DIA should stall again.
The big rally will come if uup breaks support on the daily chart.
My opinion only.
now that’s funny.
You can tone down the rhetoric GlassWizard. Members of the investing world like and need to hear both sides to every story. We can be friendly even with alternative viewpoints. So please calm down next time you take something as a personal attack. Save that for the Fox News and MSNBC message boards. It’s just economics.
Hey georic, don’t most think they’re the same anyway?
Hi there, it is not so easy to follow what you say as quite a few of you use abbreviations.
When I read sigli’s post, I thought at first that BLS was a short for Bulls..t, all the more as I was not convinced by the figures.
I could sell my StatoilHydro today; still waiting for a lower price for STD; reluctant to buy Aixtron AG at 20 euros whereas it quoted 5 one year ago: may have missed the ship (thks Ed for pointing out it was a German company). Now 39% cash.
bobisgreen,
I REALLY like the gravity comment.
sigli,
You need to do a little math, quit watching fox news, and spend a few months trying to get by on unemployment INSURANCE before crossing your arms across your chest to declare that you are in touch with displaced workers and find their motives wanting.
yx,
I know how you feel, sort of. I’ve been trying to time the top all week for shorting action! 🙂
Every time when I thought I might have missed the bottom, the market drops back to RED!
grindy2424,
Believe it or not, most charting rules can be utilized for leveraged ETF’s. While they have wilder swings than what they are based on, they do tend to move similarly. No, there isn’t a perfect correlation, and they will frequently go a little farther up and down than their resistance would otherwise indicate. But you can still use the charting rules to get a feel for the buy or sell points.
Resistance, etc. Because it is reset daily seems a bit harder to look at on charts (thought I admit that isn’t my strength).
I follow Jim daily if not hourly and have learned a great deal.
I would like to see Jim and some of the regulars join MSN.CAPS to more easily track their records and opinions.
Frank
jrb,
I should elaborate. I consider EPV as a “hold” right now. There’s still money to be made in it.
In EUO vs. DRR, it’s an ETF vs. ETN question. There are tax considerations which each individual has to consider. In my case, working from a brokerage IRA, I don’t really care, so DRR works a little better for me.
grindy2424,
Which rules are you referring to?
Ed,
Looking into the chart of epv…. Because it is leveraged to the usual rules go out the window?
And what I mean is, the flow rate is relevant because BP owes fines as well as royalty fees to the government for each barrel that is spilled, not to mention all the other clean-up/liability costs.
Off-Topic:
Ed,
Thanks for your update from previous post on still recommending DRR. I was confused and thought you still recommended EUO/EPV.
Everyone, why not just short BP? I read today that the estimate of the flow rate from the oil spill could actually range from 20,000 barrels a day (the government’s number) to as high as 250,000 barrels (!) a day (BP’s worst-case scenario). In other words, no one really knows for sure by judging just from the grainy video feeds BP’s submitted. Scary thought.
based on the market action it sure was a son of something.
RIG is down almost 10% again. Glad I didn’t buy yesterday at $46.
Refer to my post…The bear claw knocked’em out bsdgv!
Ed,
Didn’t even get coffee to go with that claw!
Son of a Bounce?
It is more like “Now You See it, Now You Don’t”
S&P500=1,061.59
-0.41 (-0.04%)
Real-time: 3:12PM EDT
I’m going to give a different view on jobs just to add a little positivity:
What do you think happens when congress extends unemployment benefits to 2 years, gives tax breaks on the bennies, throws killer cobra subsidies everyone’s way, and extends the promises every chance they get? WHY GO BACK TO WORK?
Temp hiring is up, factory overtime hours keep rising, pay is going up, people are quitting their jobs as they see better opportunity elsewhere, average workweek is up, and the BLS JOLTS number shows MORE AVAILABLE JOBS!!! as the number keeps rising. http://www.bls.gov/news.release/pdf/jolts.pdf
There is work out there. Jobs numbers are not going to look fantastic when 1. couch sitters’ only incentive is to pick up the PS3 remote, 2. Mexicans are going back home, 3. Some people just don’t want to run the rat race anymore. How long have we heard that America should start working less and enjoying life more? How many mothers do you think are simply collecting unemployment bennies until they run dry, then staying at home with the kids while pop brings home the bacon?
Sluggish growth doesn’t necessarily mean relapse into the Great Recession. Maybe it means we start the inevitable rebalancing and go on our way. How can you grow top line jobs numbers when you have a maximum in the labor force (it was somewhere around 56% in the 1950’s) and migrants are heading south? We can have a bad jobs number and a good economy. It’s called restructuring.
grindy2424,
I’m using EPV, not EFZ. EFZ is the more conservative straight short. I’m not really planning to add to my EPV position right now.
As for EFZ, if I were buying it, anywhere in the $63 dollar range would be good. The bottom resistance looks to be around $63.
Ed,
I’m hoping to see EFZ in the 63.50 range to load up. What entry point are you looking to add more?
I still think we’ll see a bit more up before a roll over
marr.bo
“Gravity”, a distasteful word…numbers flowing downhill are harder to stop and reverse than numbers flowing uphill! The “gravity” of the credit crunch (and a multiminiplicity of other factors) has had its gravitational effect on the market…Illustrated thusly: Down a lot…up a little…down some more…up a tiny bit…Now that’s the gravity of the situation…for a while yet!
The fundamentals are so much better than when the Dow was at 6500 or even 8000. Those types of statements are neglecting the gravity of the credit crunch we were in back then. There were runs on US banks (the safest economy in the world), and the equivalent of no one willing to trade or lend to the Goldman Sachs of the world because they were afraid the sky was falling and all banks were going to fail.
Don’t forget Jim Cramer also claimed back during the criss that the Dow wouldn’t be back above 10,000 until 2013 and alot of his followers missed the market rebound.
Intelligent hedge fund managers that don’t get spooked will decide when the market bounces not the Jim Cramer’s and talking heads of the world.
jamba,
Jim Cramer said his worst case scenario has the Dow in the 8000 range. I’ve heard some analysts call for 6500.
My prediction? Pain… (with apologies to Mr. T)
grindy2424,
Close out my European shorts based on export numbers from China? Frankly, I thought the European markets going up on that news was nothing short of folly.
bobisgreen,
As a bear, I love these little bounces. It just gives me more retail investors to munch on later. 😉
Jim or Ed,
Here is an interesting article on employment numbers. http://finance.yahoo.com/banking-budgeting/article/109739/the-bad-news-bad-news-on-jobs?mod=bb-budgeting&sec=topStories&pos=5&asset=&ccode=
If the forecast for June employment comes true how far could the market drop?
Skeet, I thought that take was fabulous. Gotta love the bankers, America’s best and brightest, doing god’s work, earning every penny of those eight figure bonuses.
Jim,
The title is a scream…I had the same thoughts about 11AM. Better “Son of Bounce” than son of something else!…which is what I yelled yesterday. Sorry couldn’t resist. Come on Ed, Give us the Bear version!
Jim,
What are your thoughts on Paul Farrell’s MSN commentary – American Investors: Predictably Stupid?
Jim,
One of the few bounces that I am going to attempt to trade. I think Metals will bounce a lot more than the 10%. Hard thing is to know when to eject.
If we see a bit of a bounce I will definitely go back to market neutral or slightly short.
Ed you closing shorts or partials? My guess is you may have closed some with news out of China