An anticipatory “Greek” weekend looks to be confirmed entering Monday’s session, but a narrow victory and on-tap FOMC meeting should make for an interesting week. For the five day period the SP-500 (SPY) is up 1.30% and continuing to “following through” off a less gloomy-looking June corrective low.
THE WEEKLY NUTSHELL
- “Bear, Bull, Doji Monday.” SP-500 finishes off 1.24% in bearish engulfing candle following out-the-gate, confidently complacent jump ($VIX) higher on report of Spain’s banks receiving $125.0B lifeline from EU. On top of prior week’s “best of 2012” gainer and stretched sentiment readings in VIX below 20% and 17% differential versus 10SMA intraday, imperfect bailout along with looming Greek re-vote and second-half trader talk of Moody’s possibly cutting US banks (XLF, BAC, JPM) as early as next week push investors to re-evaluate optimistic bid and smartly opt for profit-taking into closing bell.
- “Turnaround Tuesday.” From Monday’s tail-turning complacency, market’s hold of 10SMA and much more conducive / normalized VIX readings allow bulls to mount an equal-sized 1.17% campaign of bargain-hunting in the SP-500. Not-so-mysteriously, Monday’s albatross’ of Spanish bailout not being enough, still pending Greek elections and possible Moody’s bank downgrade all but disappear from traders’ radars, despite yields in Spain hitting record Euro-era highs on Fitch bank downgrade and EUR/USD seeing a bit of troublesome pressure. Traders grasping for answers behind Tuesday’s technical turnaround point to rekindled buzz of central bank stimulus in the works following comments from Chicago Fed President Charles Evans.
- “UnWindsday for Bulls.” SP-500 finishes down 0.70% after last hour reversal kills mostly flat to mildly positive session-long bid. Bulls shake off out-the-gate weakness tied to weak retail sales data for May showing 0.2% dip versus consensus drop of 0.1% and even weaker ex-auto figure of -0.4% compared to flat 0.0% estimate. On the plus side, data likely finds support from the QE3 crowd. Also, improved sentiment overseas with bid EUR/USD and Global X FTSE Greece 20 ETF (GREK) in light news session in front of this weekend’s Greek elections and despite Moody’s downgrade of Spain’s sovereign debt to BAA3 from A3. In passing, PPI data drops 1.0% compared to -0.7% forecast while core levels match with 0.2% increase. Business inventories grow by 0.4% versus 0.2% estimate. Shares of JPMorgan (JPM) finish with relative strength gainer of 1.57% as “Dimon Goes to Washington!” to testify over credit derivatives trading loss in front of Congress.
- “Turnaround Thursday.” SP-500 clocks in with 1.08% heavier volume gainer with fresh two-week closing high near intraday congestion highs on daily chart. Optimism pro-austerity New Democracy party will win Greece’s weekend election according to “secret polling” and final hour buzz central bankers will take measures to ensure liquidity if necessary in aftermath of Greek vote. Larger-than-expected jobless claims filings of 386,000 assists as well as data becomes latest to force Fed’s hand on quant easing at next week’s FOMC meeting. CPI data eases by 0.3% versus forecasts of 0.2% and making the Fed’s expected decision to act, a bit easier.
- “Bewitching Greek Friday for Bulls.” Quad Witching proves anything but menacing as bulls follow-through on Thursday’s gainer with clean breakout above resistance and 1.03% finish in front of Greek elections. Continued bid tied to central bankers “Greek Supportlova” dish, while more “bad is good” stateside data from Empire manufacturing report, industrial production and Michigan sentiment lend additional support Fed will announce monetary action at next week’s FOMC.
WEEKLY CALENDAR OF KEY UPCOMING EVENTS
Economic: NAHB (prior 29). Wildcard Eurozone credit markets as long-awaited second election in Greece finds pro-austerity New Democracy looking to squeak by with a narrow majority much to the joy of our dear friends the Bovinus Optimist.
Earnings: IHS (IHS).
Economic: Housing Starts & Building Permits.
Earnings: Economic bellwether FedEx (FDX) is one of two potentially influential reports this week with regards to the broader market. Shares of FDX have been in a four-month long tight counter-trend channel which has drifted lower against its in-motion weekly W5 which sports an estimated mid-TAPP of about $110 by the first half of October. Analysts expect the air and ground shipping giant to report profits of $1.92 per share compared to the prior year’s $1.75 on sales of $11.13B.
Discover (DFS), FedEx (FDX).
After Hours: Adobe (ADBE), Jabil (JBL), La-Z-Boy (LZB).
Economic: Weekly Crude, MBA Mortgage Index, FOMC Meeting!!
Earnings: Actuant (ATU), JinkoSolar (JKS).
After Hours: Bed Bath & Beyond (BBBY), CLARCOR (CLC), Micron (MU), Red Hat (RHT).
Economic: Weekly Claims, Continuing Claims, Existing Home Sales, Philly Fed, Leading Indicators, FHFA Housing Price Index.
Earnings: CarMax (KMX), ConAgra (CAG).
After Hours: Oracle (ORCL) is the sole earnings report Thursday night and the second of two corporate confessionals which might rustle the undercarriages of either bulls or bears this week. Analysts expect profits of $0.78 per share compared to the year ago period’s $0.75 on sales of $10.88B and revenue growth of 12.9%.
Technically, shares are carving out a symmetrical triangle of nearly 11 months on the weekly chart. For its part, our friend PS Elliott shows that same pattern signaling a Wave 4 EBOT and estimating markedly higher prices with a mid TAPP of $41 by mid-July. Our view is a downside resolution with an estimated short-term target of 23 – 24, has a much higher probability of occurring and you don’t have to be an Oracle to appreciate that.
Figure 1: SP-500 (SPY) Daily Chart
As discussed in Thursday morning’s Market Barometer weekly column, a neutralized multi-day consolidation favoring a bullish outcome has in fact resolved itself to the upside. The initial closing breakout above 30SMA resistance we focused on was confirmed on Friday as a market-based FTD or Follow-Through Day for the Naz’ Composite signaled based on bullishly-supportive volume and price statistics.
Entering the week we continue to like the prospects for bulls given the intermediate signal now in place and sentiment via the VIX ($VIX) still positioned as a support for higher market prices before complacency might, once more, get the best of bulls late to the party.
For the time being and realizing Europe’s credit markets are still obvious and uncertain drivers, as well as this week’s FOMC meeting; we’d see a break below 1313 as a sure warning for the market’s latest rally attempt given still bearish seasonal favor and a poor history of June and July “FTD’s” producing solid intermediate-based gains.
- First Week Effect 2012.
- Corrective “closing” low into key 1278 – 1300 support for SPX.
- RSI 13 divergence as SP-500 makes lower low.
- Weekly Kings & Queens candle reversal low pattern.
- FTD signal in Naz’ on 6-15-12.
- Supportive VIX readings.
- Fibonacci based butterfly completion around test of 1400.
- Worst Six seasonal period and June Gloom bearish tendencies.
- June FTD signals have weak historical record of performing strongly for bulls.
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