The markets are struggling to hold their gains as we move into the last couple of hours. Stocks initially struggled this morning only to claw back into positive territory. There is still a lot of money chasing performance even though stocks are overbought. Some of the best performers today are the financials, the gambling stocks, the airlines and even the homebuilders are showing some strength thanks to the pending home sales data. The U.S. dollar is still weak but it's starting to bounce off its lows of the session following a very sharp two-day decline.

Asian markets were relatively quiet. The Chinese Shanghai gained 0.2% marking its fourth gain in a row. The Hong Kong Hang Seng lost 0.05% ending a three-day winning streak. The Japanese NIKKEI gained 0.2% put pared its gains after hitting new ten-month highs this morning. European markets were also relatively flat. The English FTSE lost 0.2%. the German DAX gave up 0.18%. The French CAC-40 closed almost unchanged with a 0.04% decline. All three markets snapped a four-day winning streak.

The National Association of Realtors said their pending home sales index, a measure of signed contracts on existing homes, came in better than expected. Analysts were expecting a small rise to a reading of 91.2. NAR said June's reading rose 3.6% to 94.6 from an upwardly revised May reading of 91.3. This is the fifth monthly gain in a row, a feat that hasn't occurred since 2003. Even though this data applies to existing homes the new homebuilders are rising today with the DJUSHB home construction index up 1.5% and challenging resistance near its April-May 2009 highs.

Consumer spending and income was the next piece of economic data. The Commerce Department said June's consumer spending came in at +0.4% in spite of a 1.3% drop in personal income. Economists were expecting a rise of +0.3% in spending and a drop of 1.0% in income. It looks like the drop in income may be a sign that the government's stimulus checks from May have all been spent. June's 1.3% decline in income was the worst reading in more than four years. A rise in consumer spending is a good sign for the economy but it may have been due to rising fuel prices since most of the gain came from nondurable goods.

There were a number of smaller corporate news stories today. General Electric (GE) has been fined $50 million by the SEC over "improper accounting" that may distorted the company's performance. While GE neither admits or denies any wrong doing the company is settling and will adjust several quarters worth of earnings. Meanwhile Pepsico (PEP) has announced that the company's newest offer to buy its two bottlers has been accepted. PEP tried to buy the Pepsi Bottling Group and PepsiAmericas for about $6 billion several months ago. Today's deal is worth $7.8 billion and will be paid in half stock and half cash. PEP claims that by owning the two bottlers it will have better control to manage its business and reduce expenses.

One of the most encouraging stories today was bullish comments from management at Dow-component Caterpillar (CAT). You may recall that CAT raised its full year earnings estimates when they reported earnings last month even though they warned that the third quarter could be tough. Management came out again today and said that CAT was well positioned to make money whether the global economy recovers or not. If the recession continues CAT expects a profit of $2.50 per share. If the global economy recovers then CAT expects a profit of $8 to $10 per share within the next five years. Of course a lot of this positioning follows drastic cost cuts and about 22,000 in layoffs. Shares of CAT are up 5.6% on the session and hitting new highs for 2009. The stock is up almost 60% from its July lows.

Currently the S&P 500 index is down less than one point at 1001. The NASDAQ composite is down less than five points at 2004. The Dow Industrials are up about five points at 9292. The Russell 2000 index is up less than four points at 569.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

The market is churning sideways so we're not seeing a lot of action on the OptionInvestor.com play list. I am noticing that GENZ's bounce attempt is failing and the stock is trading near new lows under support at the $50.00 level. This could be a new entry point.