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Index Wrap

Markets were unmoved by the close

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A negative reaction to retailing giant Wal-Mart's (NYSE:WMT) $55.52 -4.2% quarterly earnings set a negative tone in the early part of today's session, and while traders and investors observed a larger than forecasted September trade balance and weekly jobless claims of 366,000 as not representing overly bullish economic reports, the major indices finished relatively unchanged, as if it was worth the wait to see what tomorrow's economic data says about the past, but also the future.

The one economic report due out tomorrow that I want to quickly touch on is the retail sales data for October.

Something a trader may want to think about ahead of those numbers is that it has now been widely reported that recent weather patterns have been abnormally warm, and in the retail industry, that isn't good for getting shoppers to the stores and malls. Cooler weather is a retailer's best friend as consumers coming down with a case of cabin fever of take a trip to the local department store or shopping mall to stretch their legs, maybe their pocket books, to see what's on sale.

It would be my thinking that regardless of what economists are estimating, most investors/traders are going to look at the retail numbers and give them a little slack as if to think the ex-auto's for October aren't necessarily going to be a good read on the consumer, but greater focus will probably be given to the retail sales number that include auto sales, which in my estimates would be a larger ticket item, where a consumer doesn't go buy an automobile just because they have a case of cabin fever.

Current forecasts for tomorrow's retail sales have economists' looking for October total retail sales to be down -0.2%, while forecasts for October retail sales (ex-auto) are forecasted to have risen +0.2%. So.... my thinking is that the market may put greater focus on the autos, and if my math is correct, based on economists' forecast, the "inline" number would be for auto sales to have declined 0.4% in October.

Also due out tomorrow, is October PPI (forecasted +0.2%) and core PPI (forecasted +0.1%), which is hardly inflationary. Industrial production for October (forecasted +0.4%) and capacity utilization (forecasted 75%) are also due out before the opening bell.

During market hours, at 09:45 AM EST, we'll get a look at the University of Michigan's November Sentiment, where economists' look for the sentiment survey to improve to 91.3 from October's 89.6 reading.

Here's a quick look at the pivot matrix for tomorrow, and I am very hesitant to try and call a market direction right now, as I sense a great deal of pressure building, where I can only suggest support at the WEEKLY S1s and resistance at the WEEKLY R1s.

After viewing some of today's post market close comments in the futures monitor at OptionInvestor.com, I get the impression that bears hold a high degree of confidence that the markets are at their top. As many of you know, I dislike trying to call tops when we're at highs were there is little overhead supply to keep things in check.

While the major indices look very overbought, I dare say they look very strong. When bears are saying "bring it on!" and "bulls have until tomorrow" to prove their worth after proving they can push the indices to new 52-week highs, I must say I sense a GREAT deal of bearish complacency.

Pivot Analysis Matrix

Resistance does look formidable at the WEEKLY R1s, and while there was bearish chatter that the U.S. Government can't possibly be being truthful with their economic reports, bulls have yet to cave in to such talk.

I've highlighted in PINK, those levels I deem rather IMPORTANT support and resistance levels. While these levels may seem "broad" a quick percentage calculation of the SPX's MONTHLY Pivot and MONTHLY R1, where neither level has been traded, is a modest 3.6% range in a grander scope of things.

Equity sectors finished today's session mixed, with healthcare, drugs, oil service and biotechs all posting gains greater than 1.5%.

Only the retailers as depicted by the S&P Retail Index (RLX.X) 382.83 -1.18% and the Semiconductor Index (SOX.X) 525.70 -1% posted losses of 1% or more. With a sector bellwether and heavyweight like Wal-Mart (WMT) falling 4.2%, the retailing sector held rather firm.

NYSE Composite Index ($NYA.X) - Monthly Intervals

The NYSE Composite ($NYA.X) closed above the 6,000 level today and now approached the 6,135 level, which would be a 61.8% retracement of decline from an all-time high. A 50% to 61.8% retracement often finds formidable resistance, where a pullback is expected for gains to be digested. Solid support should be found back near 5,500. Bullish traders will exercise caution in their accounts here.

While I have my bearish thoughts at these more lofty bullish risk levels, I'm not confident enough to shout, "bring it on." Not yet.

S&P 500 Index Chart - Daily Intervals

I was more willing to protect modest gains in a bullish trade today, the see them fall to the wayside. I would have rather been LONG into today's close than short. While bears talk of a top, its difficult to say what could happen should they capitulate.

Dow Industrials Chart - Daily Interval

I still would view the INDU bullish above 9,700, with my most bullish target being 10,000 at this point. Things that could get me more bullish would be capacity utilization above 77%.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

I tried to give the QQQ a bullish chance today, but raised a protective stop too tight. Still, I'm not overly upset with even a modest profit. Then tried to turn DAY TRADE bearish, but was taken out for small loss. I did NOT want to hold a bearish trade overnight. While the recent reversal back lower to "bear confirmed" at these high levels of bullish % have me VERY cautious from the bullish side in the QQQ, I know all too well the HUGE short position on the QQQ, and with limited overhead supply to keep things remotely in check if bears cave in and capitulate on an upward move, I didn't want to risk a gap higher open with the bulk of tomorrow's economic data due out before the bell.

Trade small positions would be my most worthy advice.

Jeff Bailey

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