Market Report 6/6/16

I’ve been saying for several weeks now that the SPX is trapped between support and resistance and that’s still where we are. It was literally unchanged last week closing at 2099 again. SPX 2100 is the major over / under level to watch and as you recall, last year it crossed that level something like 60 times.

We might be looking at something similar.

Here’s the daily chart with the support and resistance zones marked. Notice how it’s still hovering right up against the resistance zone.

SPX_D_652016

Going into this week I really don’t have a lot of conviction either way. It’s impossible to tell whether it’s going to be able to battle through that resistance zone and go on to make new highs soon, or whether a trip to the middle of the range or even perhaps a move back to the support zone is in the cards.

As I’ve mentioned in the past, there are certain times where inflection points are easy to spot but much of the time it’s difficult to know what to expect next. We’re at one of those points now.

On the one hand the market has been acting extremely resilient. Each minuscule dip we’ve seen lately seems to get bought. The market gaps down and then rallies back up by the end of the day.

On the other hand the market seems to be struggling up at these levels and if you zoom your chart out all the way back to December of 2014 you will see that every time in the past the market has traded around the level it is now – it’s been a precursor to a correction.

Even though the SPX is within 2 ATR’s of a new all-time high, it just doesn’t seem like it’s a slam-dunk it’s going to break out. And even if it does, will it follow-through?

That’s the one thing that keeps popping up in the back of my mind. The idea that the market makes a nominal new high and everyone gets all excited and then it reverses and we find it back below the 2100 mark a couple weeks later.

A real “breakout” would need to take it far enough away to use 2100 as a support level on a subsequent pullback. But all that seems further down the road. At this point in time there’s a big battle around 2100 and we’ll just have to see whether the over / under wins.

This week promises more hand-wringing on when the Fed will raise rates, and with the bad jobs number Friday, the data suggests they won’t be raising in June. That’s one catalyst that could send it to new highs. Janet Yellen speaks on Monday and then the Fed goes into the black-out period until the meeting June 14-15.

The market seems to be expecting that July will be the month – but as we know that will only likely happen if the SPX is over 2000.

There’s not a lot to say going into the week really and as usual it’s a stock-by-stock, sector-by-sector market.

Here’s a look at how everything stands year to date.

ytd_652016

The SPX, Dow and Russell are each up a little over 3% on the year, which the NASDAQ is still down a percent.

Under the surface it’s a mixed bag. Biotechs have been acting well the past couple weeks but the IBB is stretched. Gold and silver stocks looked like they were about to roll over but Friday they ripped higher due to dollar weakness because of the bad jobs number – which suddenly made a June hike unlikely.

Once sector that has my interest is the retailers – and I almost never like the retailers. I’m thinking some of them got overdone to the downside and there might be opportunities for a bounce. Many have already started bouncing and it’s just a matter of follow-through. I posted JWN in the chart feed last week and I still think it has a decent chance of going into the 40’s. KSS is another one that looks interesting.

We don’t have any open trades right now as the three we had going into the week all got closed. MDSO worked out well while UA and AAL didn’t. All in all I’m happy with where we are now and I like the idea of going into the week flat – looking for new opportunities.

I have a decent list of stocks with constructive patterns and will add more as the week gets going. Since we don’t have any open trades I’m inclined to pull the trigger on anything I see that sets up right.

I’ll go over all the charts on the live shows this week and post the best ideas I can find in the chart feed.

See you on the shows this week.