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Index Wrap

Coffee's brewing

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Stock buyers woke up and smelled the economic coffee pot brewing when the Conference Board said its July Consumer Confidence Index surged to a much stronger-than-expected reading of 106.1, a shocker to economists' forecast of 102.0.

Treasuries got flushed as the "safe haven" trade turned south with the benchmark 10-year yield ($TNX.X) jumping 12 basis points to 4.595%. Meanwhile, the "riskiest" portion of the bond market found bulls pushing the Pacholder High Yield (PHF) $9.35 +1.52% further above its rising 200-day SMA ($9.12).

For the first time in over a month.... stocks seemed to follow our "junk bond" indicator, if not an economic report!

Market Snapshot / Internals - 07/27/04 Close

Market internals at the A/D line were solidly positive, but I've got to think that today's gains were largely a part of bearish short-covering as the weaker NASDAQ A/D line was much stronger than the relatively stronger (in recent weeks) NYSE A/D line. If simply comparing new highs at both the NYSE and NASDAQ, I would also have to think it was bearish short covering doing the bulk of today's buying among equities, though the NYSE did post a few more highs than the weaker NASDAQ.

Question is.... are buyers smelling coffee laced with caffeine, or decaf, which has little lasting pick me up?

Is MARKET SENTIMENT shifting a little, back positive? The Broker Dealer Index (XBD.X) 119.34 +2.47%, a sector we thought might be a telling index for MARKET sentiment was among today's sector winners. Bears have made A LOT of money in this sector since January and would represent "smart money." Perhaps today's release of July Consumer Sentiment (economic impact) has bears smelling some coffee.

Major Economic Reports - 07/27/04 Close

A whiff of July Consumer Confidence may have shocked some "the economy is REALLY slowing down" bears into doing some buying today. That's helpful for a bull, but the difference between decaffeinated coffee and the real thing could present itself tomorrow morning when June's durable goods data is forecasted to show a rebound of 1.5% after two months of declines.

What bulls DON'T want to see tomorrow.

Pivot Matrix -

Recent BULLISH trades I had profiled in the QQQ had me profiling BULLISH trades at DAILY R1, feeling squeamish on a decline at DAILY Pivot, and getting stopped out for a loss at DAILY S1 on the way to DAILY S2 and then lower.

Hit me over the head with an iron skillet twice, and I think a bull should know what they do NOT want to see.

What a BEAR doesn't want to see, is what they say today, followed by SUPPORT at DAILY Pivot, then taking out higher of DAILY R1 and CLOSES back at, or ABOVE DAILY R2, which could have market SENTIMENT turning bullish (XBD.X closing above its 50-day SMA).

Hold on Treasuries, you've "reflated" just enough at WEEKLY R2, and might have some of the newly developed "recession bears" second-guessing their thoughts, after "inflation bears" were more boisterous in May.

Jeff Bailey

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