The Market Ticker

Wow, the market's open.

Hmmmmph.

Here 'ya go



There's a little edge of that pin (its tough to see on this print) that just hit the top of the channel today. Then the SPX pulled back. That'd be three bounces off resistance in the last week.

That "Hi" marker, by the way, is the high of the last year.

Notice that yesterday it poked below the channel, and pulled up. It bounced off 1480, reinforcing that level as support - the SPX has bounced off that level three times in the last week.

That's a damn tight range - 20 points out of 1500, or right around 1.3%?!

You call this a bull market? I call it bullxhxt. This is a market that right now is range bound and severely constricted. Now the DOW did break resistance to the upside today, but it remains in the channel. The Naz bounced (for the fourth time!) off resistance today as well, after coming off support at 2530 three times in the last week too!

This is a range bound market that has failed to break out or break down over the last week.

It is NOT a "Bull Run."

Yet.

It may turn into one, but to do that the indices need to break out of that channel to the upside. Is the DOW signalling this? Perhaps.

The wedge is rapidly running out of room. Back and forth, back and forth, sooner or later you have to penetrate one way or the other. The day of decision is pretty much here. This week perhaps, before the end of next week with near-certainty. Its just a matter of being funnelled - you have to move one way or the other.

Now, which way?

Well, two things to note:

• The acquisition/disposition was sharply up today (meaning more buying pressure than supply.) In other words, money chasing stock. Yesterday we were on the verge of a breakdown in this trend. Today, its not so certain.
• Volume today was relatively light. That's not what you expect on a breakout.

So what does this mean? Indecision. The ADP employment report was weak. The ISM was relatively strong, although not a blowout number.

What we've got here is a market on pins and needles with no clear decision on which way it wants to go. As such any bet today on a direction short-term is, in my opinion, a pure gamble.

My suspicion? We've got economic data coming tomorrow and Friday, and they're going to determine what happens. Initial jobless claims tomorrow, which are expected to be down 20k. We've also got productivity and unit labor costs, along with the April ISM services index. Friday we get Nonfarm Payrolls and Unemployment. Friday is the big number.

The bad news is that they all come before the market opens. No chance to react; the futures will instantly move on the data and set the tone.

Those numbers come in bad and I'll bet we get a break below support. Down 20 on the S&P will do it - that puts us both under the channel and penetrating the last support level.

Get a convincing break through support and there is a risk of pulling back all the way down to the February lows! Then the question becomes whether that event ignites a fuse somewhere.

On the other hand, come in with a solid good sweep of the board we will break the channel to the upside. If that comes decisively and with solid volume then we've got at least a short-term reprieve - the channel then has to re-establish a topside trendline, and until it does, it can and will run.

One caution I will add - if we get a breakdown and head for the February lows, be very, very cautious buying that dip until things stabilize - at least T+3. The reason for this is that such a break may generate some big margin calls inside some of these leveraged places, and those typically have 3 (business) days to be met. The risk of a credit market disruption comes during that window - you buy the dip thinking its a great opportunity, there's a blowup somewhere bad, and you just got suckered.

The Canary got up and started walking around, but unfortunately someone also poked the Cat today, and he is up too. So while the Canary is more healthy than he was, he's now at risk of being eaten, where before he was just at risk of being gassed. Oh, and he's got a broken wing!

I am definitely not taking any new long positions right now. In fact, most of them have been stopped out. Nor would I short into the market at this point, with the exception of the couple of tactical shorts that actually made money today in what was otherwise an up (thus, should have lost money) market. You know you got a good trade on when you're short a couple of Naz names that actually went down with the index up 1%+.

If we break out above that wedge convincingly I will likely take a short-term trade on the long side - probably with SSO - and ride it until exhaustion with a tight stop under it.

What drove this today? Retail. That's why volume was down - the institutional guys are pretty much done at the moment, but having "DOW 13,000!" splattered all over the newspaper and on every news channel - "New Records!" - has drawn back in the moths..... unfortunately, I fear the light they are flying towards is behind a bug-zapper grid.

In short the day of decision on the short-term direction of the market is, for all intents and purposes, here. One way or another, we are going to break the range within the next few days.

"May you live in interesting times."

Labels: Dow Record, Up Market

10,102 contracts have traded thus far today on the June 90 strike.

That is crazy out of the money - by more than $33.

The last sale was in the middle; that looks like an acquisition, not an unloading. I'll check the OI in the morning, but if that is an acquisition, its a damn big one -and that far out of the money, it is extremely ominous.

That's the emerging markets ETF by the way..... either someone is ditching a bad position, knows something is coming internationally, or that's one of the nuttiest bets (albiet modestly cheap - $100kish) that I've seen in a long time.

Update - the PUTs did not "Stick". However, there was also very little net distribution. In other words, the total OI, while it went down a bit, did not account for the difference.

So this has to be reclassified as a "neutral" indicator - at this time.

Interesting morning!

First, ADP's payroll report was not very positive - at all. Far below economist estimates, and worst in four years. Of course that's a "private estimate"; the real number comes out Friday.

There is, however, reason to believe that the number might be right. Layoff plans up big huh? So says Challenger.....

Mastercard (MA) reported a huge quarter. Well, gee, isn't that what we've seen from everyone else in that sector? I do think so. As a consequence this should not be a surprise, and indeed it is further evidence that we've got more than a small problem with people blackening their credit cards.

The other "sleeper news" was that the Treasury is stopping the issuance of 3 year T-Bills. The "official explanation" is that the deficit is growing smaller, therefore, they don't need to issue them. Uh huh. And I'm Howard Hughes. Let's be real - in all probability the issue is that the bids they've been getting aren't what they'd like. Remember, not long ago they stopped issuing the "long bond" - the 30 - but then it quietly came back on the scene.

Last night H&R Block (HRB) dropped a bomb, in the finest tradition of late night announcements. Today its being spun to be a good thing, but credit facility reductions are not positive guys - no matter what sort of spin someone tries to put on it. The market seems to be (mostly) ignoring it; HRB is down modestly today.

Markets are up modestly today, but there's no real strength behind the move. Internals are quite good, but we're still looking at the same scenario we've been staring at for the last couple of months.

One quick aside - Usana Health Sciences (USNA). Simply amazing story here - a stock that has been extremely volatile, and a company that is quite literally under attack - not in the usual ways, but rather with an interesting twist - a securities lawsuit (common) aimed at the core of the firm's marketing model. This is the sort of suit that, if successful, has the potential to topple the company. With volatility as high as it is on this one, and a very high short interest as well, playing this issue (on either side) is a definite high-wire act.

More later as developments warrant.

Disclosure: I'm short USNA.

Labels: Credit, Layoffs, Payroll, Usana, USNA