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Tuesday ended with articles trumpeting the Dow's six-year closing high. Wednesday opened with articles proclaiming another multi-year high: a 25-year high in gold futures. A weaker dollar certainly contributes to higher prices in gold futures because it takes more of those weak dollars to buy the same amount of gold. The dollar had declined in the wake of the G7 meeting, although many of the finance ministers around the globe have spoken out, saying that the statement coming out of that meeting, perceived to be dollar negative, had been misunderstood.

In addition, higher crude prices contribute to inflation concerns, prompting a rise in gold. Heightened geopolitical concerns drive safe-haven investing in the commodity, too, which in turn prompts short covering. Perhaps helped by a moderate bounce in the dollar against some currencies, gold futures were to close at a nearly 26-year high, at $668.50 an ounce, after hitting an intraday high of $679.80. The day's action produced a long-legged doji, a signal of indecision as gold futures test these levels.

Investors faced a combination of higher commodity prices, nervousness ahead of Fed Chairman Bernanke's address today and economic releases, mixed Asian and European overnight performances, and some upbeat comments and outlooks from selected companies. That led to a mixed pre-market outlook on how U.S. equities might perform.

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The day ended with indices showing mixed performances, too, as investors sorted out the impact of stronger-than-expected economic releases, mixed earnings releases, and a drop in crude that also sent oil-related indices such as the XOI and OIX lower. Most sectors eased today, although the transports and semiconductors were notable exceptions and the RUT ended higher by $0.12.

Decliners led advancers on the NYSE, AMEX and Nasdaq. Jim Brown has been pointing to some areas of concern in the new highs/new lows figures when considering the health of the long-in-the-tooth rally, but today the number of new 52-week highs held relatively steady when compared to yesterday while the number of new lows rose slightly. The evidence was mixed, as it was to be on many fronts on Wednesday.

Other analysts are beginning to mention such concerns about breadth measures, too. In a Marketwatch.com article, Marc Pado of Cantor Fitzgerald remarked that momentum and money flow oscillators were not confirming gains. If bulls might be nervous, scorched bears must be more so, however, because so far no sign of an impending pullback, no matter how reliable in the past, has proven reliable now. Even today's malaise was greeted by tepid bounces that moved indices off their lows and proved that bears still can't produce any follow-through even if the bounces weren't conclusively bullish.

Annotated Daily Chart of the Wilshire 5000:

Annotated Daily Chart of the SPX

Annotated Daily Chart of the Dow

Annotated Daily Chart of the Nasdaq

Annotated Daily Chart of the SOX

The earliest economic report of the day was issued by the Mortgage Bankers Association, the MBAA. That report came on a day when other surveys are showing that home inventories in the Midwest are reaching record levels in what one analyst still prefers to call a correction rather than a slowdown. That MBAA survey showed mortgage application volume recovering, rising 8.8 percent in the week ending April 28. Other components also jumped, but four-week moving averages still suffer from the previous nine weeks of declining volume and dropped. The refinance share of activity fell to 35.2 percent of all applications, with this percentage at an almost two-year low, likely due to the increase to 6.57 percent in the interest rates for 30-year fixed-rate mortgages.

The DJUSHB, the Dow Jones Home Construction Index has been testing the weekly 100/130-ema's, currently at 821.64 and 775.86. The index last tested these averages in early 2003, but hasn't produced a weekly close beneath them as long as QCharts carries the data. While testing these averages, the index also approaches the April 2005 low of 781.17, with yesterday's low at 784.02 and today's close at 797.84. Market bulls of any stripe want to see the interest-rate sensitive DJUSHB hold those support levels on weekly closes. So far, the pullback can be characterized as a pullback to long-term support, but too much lower and it will look like something more bearish.

Next in the day's economic releases came April ISM services and March factor orders. ISM services rose to 63.0 percent versus 60 percent in March, handily beating the consensus expectation of 59.6 percent. New orders rose to 64.6 percent versus March's 59.5 percent. Inventories rose, too, however, to 59.0 percent versus March's 54.0 percent. The price index jumped to 70.5 percent from the previous 60.5 percent, indicating an increase in inflation pressures. That, obviously, is unwelcome news when markets still appear sensitive to rate-hike jitters. The ISM services number isn't considered as predictive of GDP growth as is the ISM factory number, but today's release certainly corroborated the growth predicted by the factory number released earlier in the week.

March's factory orders also rose more than expected, by 4.2 percent against an expected 3.7 percent. That was pegged as the largest gain in almost a year, sending orders for the first three months of the year higher by 9.6 percent when compared to the year-ago level. February's factory orders were revised higher, up 0.4 percent versus the previous 0.2 percent, so the increase was rendered even stronger. Shipments and inventories both rose, by 0.8 and 0.7 percent, respectively, keeping the inventory-to-shipments ratio at a steady and low 1.17. Durable goods orders, an important component, rose 6.5 percent. Nondurable goods rose 1.5 percent, and capital equipment orders gained 3.9 percent. The numbers predict strong production in the next months and confirm high growth in the U.S. factory sector, also not entirely welcome news ahead of next week's FOMC meeting.

Bonds reacted immediately, losing ground, as yields popped higher. The yield on the ten-year, already flirting with recent highs, shot to a new four-year high of 5.17 percent, closing at 5.14 percent. Bernanke wasn't destined to provide clarification, no matter how jittery markets might have been before his midday talk. He wasn't slated to address interest-rate concerns when speaking at the Anacostia Economic Summit, and no question-and-answer session was included. My forex news source usually reports in depth on any FOMC committee members who speak and it was still silent mid-afternoon on the subject of Bernanke.

Ahead of the release of crude inventories, ExxonMobil's chairman and chief executive Rex Tillerson accepted an invitation to speak on the Today show. He's a brave man, considering that politicians and reporters have been in a tar-and-feather mood concerning the oil majors lately. Jim Brown has reported lately on the thinner margins that these companies have when compared to some others and the massive expenses they face, so I won't belabor that point.

While speaking on the Today show, Tillerson denied any price manipulation among oil majors. He commented that although the company had reported windfall profits, the government had also already collected windfall taxes from those profits. He noted the company's responsibility to protect shareholder interest, and noted that many pension plans, teacher retirement plans and individual investors depended on the company's performance.

According to CNBC, forecasts predicted declines of 400,000 barrels in crude inventories, 200,000 barrels in gasoline and 600,000 barrels in distillates. Figures from other sources differed, with the forecast drop in crude supplies smaller from some analysts. Instead, gasoline inventories surprised to the upside, building for the first time in nine weeks. Those inventories rose 2.1 million barrels, according to the Energy Department, but that build still kept gasoline inventories 4.8 percent below their level a year ago. Crude inventories also rose, by 1.7 million barrels, but distillates fell a greater-than-expected 1.1 million barrels. Refinery utilization inched up to 88.78 percent.

The American Petroleum Institute's numbers pinned the rise in crude inventories at 2 million barrels and gasoline inventories at 4 million barrels. The API said distillates fell 1.3 million barrels.

Crude for June delivery had been slipping toward the 15-minute 100-ema (all sessions) ahead of these reports, off yesterday's $74.99 intraday high, and it fell through those averages after the report, erasing some of the built-up premium due to the Iran standoff. Industry watchers were already commenting that the build in inventories might be temporary and might even be partially attributed to refineries' tendencies to rid themselves of their supply of winter-grade gasoline.

The crisis meeting precipitated by Bolivia's decision yesterday to nationalize its oil and natural-gas businesses was to include presidents from that country, Brazil and Venezuela, and had the possibility of adding back some of that premium, but crude futures' attempts to climb were met by resistance at those same 15-minute 100/130-ema's that had previously served as support. Brazil and Spain have invested heavily in Bolivia, and Bolivia also supplies half of the natural gas consumed in Brazil.

The TRAN had zoomed above 4700 again late yesterday and had continued its climb early Wednesday morning, but it was to show some volatility through the day. Rising crude costs and valuation concerns led Morgan Stanley to trim its rating on TRAN component FedEx Corp. (FDX) to an equal-weight one and to cut its estimates of fourth-quarter earnings. Airlines were reporting April air traffic and load factors, and were showing mixed performances, including those that are components of the TRAN. Late in the day, however, the TRAN, with the bounce at least partially led by a FDX bounce, zoomed up just above that previous intraday high, only to face immediate selling.

Earnings from insurer Cigna Corp. (CI) showed falling revenue and net income. However, revenue of $4.11 billion appeared in line with expectations of $4.1 billion, and adjusted earnings from operations of $2.11 a share appeared to beat expectations of $1.89 a share. CI weighed on the healthcare sector, however, dropping steeply and closing at $90.00, near the low of the day, far below the $118.52 close just six trading days ago. Bausch and Lomb (BOL) weakness also weighed down the sector. Reports of new infections among those using BOL's products hit the company's stock and sent it to a new 52-week low.

Clorox's (CLX) third-quarter report was deemed disappointing, and it gapped lower. Time Warner's (TWX) reported earnings that rose 59 percent, but that gain was helped by asset sales while revenue missed estimates, falling 7.8 percent. AOL and film sales declined. A media analyst blamed the decline partially on tough comparisons. Revenue had been expected to be $10.89 billion and came in at $10.46 billion. Earnings, however, were $0.26 a share when certain charges and discontinued operations were excluded, with expectations for $0.20 a share.

Proctor & Gamble (PG) raised the midpoint of its full-year outlook by $0.02, with the new range $2.61-2.63, prompted to do so by better-than-expected third-quarter results. However, the midpoint is now in line with previous analysts expectations of $2.62 a share, and investors didn't appear happy with that "raising" of guidance, with the stock's price gapping lower. PG closed at $56.22, well off the low of the day, but far below yesterday's $58.11 close and the 200-sma at $57.32. The company reported third-quarter income of $0.63 a share against expectations of $0.61 a share. Sales of $17.25 billion appeared to be shy of the expected $17.6 billion, according to one source, but another headlined the company's report by saying that it showed strong sales and EPS growth.

Qwest Communications (Q) reported earnings of $0.05 a share on revenue of $3.48 billion, with expectations at $0.01 a share on revenue of $3.49 billion. The company said the improvements over the previous quarter's results were produced by strong sales in high-speed Internet, advanced data, long distance and wireless sections. Q closed lower today but essentially chopped between nearest support and nearest resistance.

After last night's earnings report, CIBC cut its rating for Adobe Systems, Inc. (ADBE) to sector perform, down from its previous sector outperform. Although the firm still had good things to say about ADBE, it felt that a slowing in demand could impact results for late in the summer. ADBE lost 8.57 percent. J.P. Morgan raised its rating on specialty chemicals company Mosaic (MOS), liking what it saw in the group's handling of its phosphate unit. The new rating is an overweight one, up from the former neutral rating. The company's stock gained 4.09 percent. Banc of America raised Motorola (MOT) to a buy rating while leaving its price target for the company unchanged, with MOT gaining 3.05 percent today.

In a market-impacting development, Microsoft (MSFT) produced another new 52-week closing low, closing down 3.49 percent. The beleaguered stock dropped after reports that it might take a stake in Yahoo (YHOO). In a day that was characterized by mixed evidence, it wasn't surprising to find that the MSFT effect was somewhat countered by a positive reaction to Qualcomm's (QCOM)'s raising of its outlook for the third quarter's EPS. QCOM gained 1.35 percent.

Many of the companies who disappointed or were downgraded today plunged in the morning, but had bounced strongly off their lows by the end of the day. While a change from earlier in the year, when even a disappointing report might be greeted with a buy-the-fact response, sellers are punishing companies that disappoint them. Bears shouldn't become too fearless just yet, however, because dip-buyers clearly still snap up such bargains after prices have been pushed sharply lower. I consider this reaction one that should have bulls perking up their ears, watching for the signs of the matadors, but not clearly bearish as yet.

Thursday's reports include initial claims and preliminary first-quarter productivity at 8:30 and natural-gas inventories at 10:30. Companies reporting earnings will include ATVI, AU, BRL, CTIC, CWEI, CNO, CVS, EK, RDEN, GMST, GLBL, GT, ITWO, ICOS, KMG, LCUT, MCK, OLGC, TSG, SU, SFY, TYC, UBS, UVN, VPHM, and OATS, among others. More important will be Friday's reports, and tomorrow could be more about positioning ahead of those reports than about what happens tomorrow.

Although indices showed mixed performances, market-leading indices, the TRAN, RUT, and SOX all gained, although the RUT's gain was far from encouraging and the SOX still churns inside its triangle. The TRAN verges on a new breakout, however. As the day closed today, the TRAN struggled with Keltner and historical resistance. I truly don't understand its unrelenting climb in the face of higher crude costs, but that triangle looks like a bullish right triangle at the top of a climb and I'm not going to argue with my dollars as long as the TRAN still climbs.

For early tomorrow morning, the TRAN's 30- and 60-minute nested Keltner charts look as if the TRAN is more likely to pull back slightly than it is to climb, but the 15-minute chart suggests that it hit short-term support at the end of the day. The SPX looks more likely to pull back, perhaps only to 1307, but perhaps to 1301-1303.70. The DOW's outlook is mixed, with the Dow looking about as likely to go on challenging resistance at 11,412 as it is to dip to 11,389 or perhaps even 11,381. The Nasdaq's Keltner support just keeps sliding lower, and the Nasdaq had just hit resistance at 2306 on 15-minute closes at the end of the day, looking as if it might be time for it to ease at least toward 2302.

As should be apparent, even the shortest term views give no consensus about what might happen next, or at least give mixed outlook for various indices. So far, as this report is prepared, after-hours developments, including ERTS miss and subsequent decline, do not seem to be strongly impacting futures. The daily chart shows the Nasdaq poised on long-term support, so as long as the SOX and RUT gain, any tests of the 100-sma at 2291 might occasion tentative dip-buying. I certainly wouldn't count on that dip buying if the SOX and RUT turn tail and dive tomorrow, however. If you're participating in that dip-buying, keep stops tight, and anything other than a quickly reversed dip below the Nasdaq's 100-sma should worry bulls.

As long as the TRAN is gaining, and particularly if it breaks to a new high again and sustains it, any Dow dips to the 10-sma might occasion dip-buying, too. If you're participating in that activity, keep positions light and stops tight. The same is true of SPX dips to the 30-sma, with those perhaps occasioning dip-buying as long as the TRAN continues to gain. If the TRAN drives lower after the late-day test of the previous record high, I wouldn't participate in any dip-buying.

Here's my real impression. Other than the TRAN, resistance is looking as important as support lately, and investors are beginning to react more negatively when they're not pleased with earnings or developments. Many indices are at the top of rising regression channels, and it may be time for indices to drop back toward stronger support at the bottom of those channels again, even if indices are to remain strong and continue climbing within those channels. The Wilshire 5000's behavior since November after consolidations such as the recent one are in keeping with the possibility of a dip toward support. Keep those bullish stops tight, but be aware that bears don't yet have any evidence that they're on the right side, other than in short-term plays.
 

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