Morning Stock Market Report: Churn and Squirm

So yesterday the stock market etched out a 1% gain on all sorts of "good" news about wholesale inflation, retail sales data, etc. Today, stock futures are lower with the market poised to do a giveback of at least some of that 1%. I seem to recall mentioning a few days ago that we would see this type of action in the markets. The word I used was "choppy", though "churn" is another good word.

  

I like to keep things simple with charts and prefer to look at trends.

  

  

This chart of the S&P shows a few important takeaways. I’ve put up a chart with Bollinger Bands. From the left hand side of the chart (July 2010) you can easily discern a lower band, a mid broken band and then an upper band. Further up there are two horizontal broken lines that I’ve also drawn in.

  

What does all this say? Simple. During times of market weakness, the S&P has tended to trade at the lower range of the Bollinger Bands and during times of strength the market has traded in the upper range of the BB bands with a break above the mid point of the bands signaling rally time.  

  

Right now we are trading at the lower end of the BB bands, and this is important.

  

While yesterday’s S&P and Dow gains of around 1% were nice, the gains are still quite a bit below the mid point of the BB bands which is 1310. The market needs to mount a more meaningful rally, pierce the mid point to signal a return to strength. Yesterday’s one day wonder wasn’t quite enough.

  

As for those long horizontal broken blue lines? I drew them in to show support. 1250 area is the March lows. The 1200 area stands out as it was the launch pad for a rally that went on from last December to February.

  

If you use your own imagination, you can see that further support resides at the 1170 level, and the 1130 level (last summer’s market ceiling).

  

For now there’s upward resistance at 1290, 1300, then 1310, then 1340.

  

$P is for Pandora. It’s coming to market today at a valuation that makes it worth more than all of the major market radio broadcasters combined. It picked a heckuva day to  go public. It’s been losing money for the past decade. It comes to market at $16. Perhaps the usual pop and then Linked-in, or RENN like drop?

  

Core CPI rose nu a surprise .3%. That’s hotter than expected and not market friendly.

  

Aunt Esther Ugly: June NY Empire Manufacturing: -7.79, vs. Cons. +12.