Surprising numbers from China and low jobless claims boosted early trading. S&P futures were up around +6 points during the first part of the morning on the big bounce in Chinese export data. Our own jobless claims added to the positive spin, further boosting early trading. The bullish vibe carried into the open and held, for about 15 minutes. Soon after the opening bell retail comp store sales, which are not that great an indicator, revealed some mixed signals in the sector. The early rally slowly lost steam, turning negative just before 10:30 AM.
Asian shares ended the trading day mixed. The stronger than expected Chinese export data helped to lift stocks on the Hong Kong Index but failed to boost mainland China. Japanese stocks fell to a one month low following the conclusion of the Bank Of Japan policy meeting. Japanese interest rates and policy remained unchanged, leaving investors wondering if Abe and Kuroda can really affect long term change in the country. European markets were buoyed by the news from China, gaining an average 0.30%. Chinese import data also saw a lift, more than 10%, and helped to boost the European markets.
The early weakness did not last long. After reaching bottom the indexes all quickly made their way back to positive territory. The S&P was capped at the 1700 level, the Dow at 15,500. Tomorrow could see the indexes move above near term resistance and approach all-time high levels. It could also see the markets halted at resistance, there isn't much in the way of market moving data scheduled for release.
The Economic Data
Data was light today, consisting primarily of jobless claims figures. Jobless claims remain mixed. No significant dip or drop has yet been noted. Initial claims gained 5,000 from a small upward revision for a net addition of 7,000 claims for this week. Initial claims are 333,000, just off the long term low and the fourth week of claims under 350K. This is good but is still not enough to significantly alter the jobs outlook of slow growth. The four week moving average of claims also posted a mild gains but is also still under 350,000.
Continuing claims also climbed, adding a 67,000 to last weeks unrevised figure of 2.951 million. This weeks 3.018 million continuing claims is above the 3 million mark but still near long term lows well below the 12 month high. Total claims for unemployment fell this week. This is the second week of decline since the total claims figured spiked. It appears that the spike in unemployment claims we witnessed over the last month is temporary. The longer term trend in claims is flat to down-ish but as of yet there is no sign of real improvement here. California's initial claims fell by more than -21,000, topping the list of states with declines in unemployment claims. No states reported an increase in claims more than 1,000.
Other data released today was monthly retail comp store sales figures. The data was mixed but most be taken with a grain of salt. In the past close to a hundred retailers participated in this release. Now the number is less than 12. What data we did get showed strength in some areas and weakness in others. Teen retail was one of the weakest segments. Even those with an increase in sales posted results below expectations. Costco was one, with a 4% gain that was only 1% below expectations. On a sector basis, the 11 companies that currently report are expected to post gains of close to 4.5% for July. Last year during the same period the average was closer to 1.5%. The XRT appears to be tracking with the broader market. The ETF has retreated from the recent new high and is now bouncing weakly from support. Indicators are mixed but the long term uptrend is intact. A break below the 30 day moving average could take the ETF down to the $77.50 level.
BOJ Holds Rates Steady
The Bank Of Japan held interest rates steady and made no indication of further policy change. This raised speculation over the banks, and Shinzo Abe's, ability to affect the yen and the Japanese economy in the long term. The yen spiked on the initial reaction but quickly fell back to yesterday's close. The pair is currently sitting on the long term 150 day moving average and is very close to Abe's original yen valuation target of 95. This pair may be winding up into a bullish triangle but as of yet no break out has occurred. At this time MACD is showing support at the current levels and stochastic is heavily oversold, leaving the pair open to rally. Any further declines will face long term support at 95.
Gold Recovers Some Of Yesterday's Loss
Gold prices rebounded strongly today. The spot price of gold climbed more than $20 in today's trading to regain the $1300 level. The Gold Index, which has been suffering from the low prices of gold, climbed today as well. The index is near the long term lows and below the 30 day moving average. The MACD analysis points to the possibility of support at this level but no confirmation is evident. At best this index could be expected to trend sideways into the near future. A break above resistance or below support will be needed for a stronger assessment.
Gold companies did not fare so well in the past quarter and are not expected to do any better this quarter. The higher cost of energy and low gold prices are squeezing margins for the gold producers. Barrick Gold, in it's quarterly report, revealed that costs vary from mine to mine but can range up to three times the current price per ounce. This may lead miners to reduce production which could lead to higher prices for gold and profits for miners, at least on a short term basis.
The Oil Index
Oil dropped into today's session. The economic data and tapering were blamed. Strong, or just good, data leads to tapering which leads to fear of oil demand decreases. Adding to bearish feelings in the energy market were higher than expected gasoline inventories. The price of crude, Brent and Rbob all fell by more than 1%. However, oil prices are still at longer term high levels and supported by strengthening U.S. economic data. Also, today's Chinese import figures must have been ignored because it showed a big increase in petroleum imports. The Oil Index gapped open and then traded lower but found support once it fell beneath the short term moving average. By days end the index had recovered and regained the early high. The daily chart indicators are a little mixed but still support a rising market. On the long term charts the index appears to be near a point of change. I say this because the MACD peaks have narrowed their range to near zero while stochastic is trending sideways near the middle of the range. There is no strong direction indicated and the index is near the top of a long term range. At this time I see this index as range bound until we get a break above or below support/resistance. Support at 1350, resistance at 1430.
This week is perhaps the fullest week for earnings report. I did not make an exact count but the number is up above 700 or so. Out of the week, today may have had the most individual reports. Aside from the sheer number there were not many high profile companies on the list. Priceline was one. The online discount travel site was expected to report earnings of over $9 per share. This is nearly a 100% gain from the previous quarter. Price action in Priceline has been bullish but technical indicators may have been foreshadowing poorer results than expected, but they weren't. Priceline beat expectations by nearly $0.70 per share. The results sent the stock price up over 5% in after hours trading and set a new high. The longer term charts are firmly bullish.
Tata Motors also released today. This comes one day after Tesla Motors reported a surprising jump to profitability. Prices of TTM jumped more than 4% from a long term support line and potential bottom of a longer term trading range. The stock has been trapped below the $30 level since reaching it's peak in late 2010. At this time it looks like $22.50 is emerging as the new, higher bottom of the range. MACD shows increased support at this level. The India based motor company posted a big gain in earnings but still failed to meet expectations. Revenue decreases on a year over year basis by more than 20%, blamed largely on slowed growth among Jaguar and Land Rover brands.
After the initial opening gap up the broad markets retreated into negative territory. It may have been the poor retail sales data but I think that is just forcing a reason on the market. I think it may have just been cautious investors waiting to get in. Once the S&P 500 turned negative it made a quick dip below 1690 and then promptly turned tail and lit out for higher ground. Once reaching the afternoon high 1700 produced some resistance. 1700 is the level where the index made its initial fall this morning as well. In the nearer term 1700 will be the level to watch but the index is indicated higher on the 30 minute charts.
SPX 30 minutes
On the daily charts the index (SPX) is bouncing from support. The index is still consolidating after breaking out to new highs last week but is showing positive action. This mornings pullback may have been nothing more than backing and filling, allowing traders to get in who may have missed this entry yesterday. This is also the second Thursday in a row that traders have stepped into the market and providing support at 1690. 1700 exists as a near term resistance, stronger resistance is at the current all-time high of 1709.67. Any break below the current support of 1690 will face further support at the 30 day moving average, the previous all-time high and the up trend line.
The Dow Jones Index is already below the previous all-time high and resting on the 30 day moving average. Longer term the Blue Chips are bullish with rising technicals. Nearer term the index is in a tight range between support and resistance. A failure to regain 15,500 could result in the index retreating to the long term up trend line.
The Nasdaq also gapped higher this morning before selling off intra-day. The indicators on the daily charts are not looking great for near term bears. The MACD and stochastic are both highly divergent and point to potential weakness. Near term support exists around the previous 13 year high level with additional levels around 3550 and 3500. This index, like the others, is extended well above the long term trend line and the 150 day moving average and in position for correction. A drop below support would be a warning sign of a potential 10% downside move. On the bullish side of the coin, the index is also in position to make another upside move. The longer term trend is up, the economy is expected to improve over the next 6 months, and the indexes are trading near all-time high levels.
The Transports also fell below its support level. This index is also bouncing from the 30 day moving average. The long term trend is still up here as well. The indicators are currently moving lower but appear to be rolling over. Longer term trend could easily carry this index back over resistance and pull indicators back into bullish pose. However, there is significant resistance associated with the previous all-time highs and the cumulative affect of tapering, sequester and pay-roll taxes. Failure to more above this resistance could keep prices contained in the near to short term if not longer.
Dow Transports daily
In the longer term the broad markets are indicated higher. In the shorter and near term the indexes are mixed. Indicators are weakening but prices are holding support, for now. At the same time near term resistance is emerging. Tomorrow will be important because index prices could easily move above resistance or below support. I think though that tomorrow will be another mild day while the markets wait for a clearer signal. This signal could come from the data or directly from the Fed but I think it will be centered on tapering. Tomorrow there is not much in the way of data, Wholesale Inventories. Next week the calendar begins to fill up again. Housing starts, building permits, mortgage index, jobless claims, PPI, CPI, Philly Fed and Empire Manufacturing top the list. No one of the data points will alter the economic outlook but together they may. Tapering is factored in as far as I'm concerned and only the market can prove me wrong.
Until then, remember the trend!