The market made some gains today but remains in a holding pattern while we wait to see what happens in the Ukraine.

Introduction

Global markets made some gains today but equities remain in a holding pattern. Light summer volume and continued uncertainty over the Ukraine situation and Russian convoy of aid are keeping stocks in check despite soothing words from Vladmir Putin. Early weakness in the European markets stemming from poor GDP figures reversed upon statements from Russia's leader that Russia did not want the violence to continue and would do whatever needed to help end the bloodshed. US markets also responded favorably to the news with futures indicating a positive opening. Negative GDP in Germany for the first time in 12 months was shrugged off in hopes that global growth would resume.

Market Statistics

Futures trading in the early part of the morning was mostly flat ahead of the statements released by Putin. Trading lifted in the wake of his statements and was boosted a little by today's economic data. The positive trade held into the open with the SPX gaining 2-3 points right out of the gates. The indices drifted higher for the first part of the day before hitting resistance around noon. Just before 1PM ET the President made a statement concerning the state of our involvement in Iraq and the progress being made in that region. His statements gave the market a slight boost and lifted them to a new intraday high. After lunch the markets drifted near the highs of the day until the final minutes of trading. Some late day news, just before the closing bell, that Iraqi Prime Minister Maliki had resigned pushed the market to another new high.

Economic Calendar

The Economy

Weekly jobless claims rose this week by 21,000 from a mild upward revision. Claims came in at 311,000, just above estimates, with a +1,000 revision to last week's figures. The four week moving average of claims also rose, by 2,000, but remains below 300K at 295,750. This is the fourth week the moving average has been below 300K. On a non adjusted basis first time claims rose by 20,960 or 8.5%, slightly ahead of the seasonal expectations and adjustment factor. On a state by state basis no state reported an increase in claims more than 1,000 while several states, led by California and Tennessee, posted decreases in claims greater than 1,000. Based on the table it appears as if the recent drop in claims has hit a bottom but remains near long term lows. Futures trading, positive ahead of the release, lifted marginally afterward.


Likewise, continuing claims for unemployment are also flat for the 4 week period. Claims for ongoing unemployment rose by 25,000 in this weeks data, also from an upward revision of 1,000, to hit 2.544 million. This is just off of the long term low set last month. The four week moving average of this figure also rose slightly. The long term trend in continuing claims also hit a pause but remains near the recent lows.

Even with the gains in initial and continuing claims the total number of Americans receiving unemployment fell by over 40,000 to 2.536 million. This is just of the long term lows for total unemployment and a sign that long term unemployment is still improving even though near term fluctuations in the job market persist.


Import/Export prices were basically flat for the month of July. Export prices rose 0.3% last month, reversing a -0.3% drop in June. Import prices dropped -0.2% this month but remain flat when oil is factored out. There were no revisions to last month. On a year to date basis both import and export prices are rising with 0.5% and 0.6% respective gains.

The Oil Index

The weak EU GDP combined with high supply levels to put a hurting on oil prices. WTI lost more than $2.00 on an intraday basis to fall below $96 for the first time in over 5 months, dating back to the beginnings of the Ukraine and Islamic State crisis. The Oil Index opened higher today, in line with the broader market, but was unable to hold onto the gains. The drop in oil prices is weighing on the index and the sector but for now longer term support appears to be holding. The index has been trading at support, just above 1630, for over two weeks while the market works out this recent dip. Momentum is still bearish is in decline with the longer term analysis still showing support along the current levels. Stochastic is a little more positive and showing an early/weak trend confirming signal. Should the index break down through support at 1,625 it would find the long term trend line about 75 points lower.


The Gold Index

Gold held steady again today, trading around the $1315 level for most of the day. Weak EU GDP and mild increases in US unemployment claims helped to underpin gold prices while we await the outcome of the Russia aid convoy stand off. Today's action was in a tight range just over $10 and found resistance at $1320 once again. $1320 has been an important resistance area many times over the past 6 months as traders try to match prices with underlying fundamentals and near term risks.

The Gold Index also tried to trade to the upside, and also found resistance. The index tried to break above my resistance line at $103.90, the upper range of the resistance zone I described on Monday, and created a bearish doji candle. Today's action appears to be a confirmation of a longer term resistance line and a possible short term double top within the longer term bear market. The indicators are divergent and in line with resistance at this level, pointing to lower prices. However, as always, gold prices will have a lot to do with movement in the index. Near term fear could spike and drive gold prices higher carrying the index with it.


In The News, Story Stocks and Earnings

Wal Mart, amongst a handful of other retailers, reported earnings today. The big box discounter reported earnings in line with estimates but cut its full year out look on rising health care costs and investments in ecommerce. EPS of $1.21 per share matched estimates but full year guidance was lowered to just below the previous estimated range. Sales on a US and international basis were both relatively flat, especially when compared to a 24% rise in ecommerce sales, the second quarter in a row of above 20% increases in that segment of business. Shares of the stock opened lower, then traded even lower, before finding support and moving higher later in the day. On a longer term basis Wal Mart is trading near the bottom of what is now a 15 month range with indicators confirming support.


Other retailers reporting today include Kohl's, Nordstrom and JC Penny. Nordstrom and JC Penny both reported after the bell. Kohl's reported EPS well above estimates on revenue in line with expectations. The report had shares of KSS up as much as 5% in the pre market session on hopes there would be a turnaround in this month's official retail sales figures. The stock gapped up at the open, near a long term resistance line and the top of the 12 month range. Volume was high today, more than twice average daily volume for the second day in a row, and indicates interest in the name. The indicators are bullish and the report definitely inspired some buying but this stock looks contained below resistance at this time.


The XRT Retail Spyder received the benefit of the doubt today, rising more than 1% in today's action ahead of earnings from JCP and Nordstrom. The market had big expectations for JC Penny at least and that, along with the rise in Kohl's, helped to lift nearly the entire sector. The XRT gained about a half percent today, rising from the long term moving average above the short term moving average with weakly bullish indicators. The ETF has been in a range for at least 12 months and remains trapped within that range now. Prices are currently consolidating near the bottom of that range and look as though they could drift to the upper boundary in the near to short term. Near term support is just below the current level around $85 with longer term support just below that around $82.50.


JC Penny traded up by 3% in today's session on expectations the retailer would show improvements. The company is still in recovery following a management shake up that nearly destroyed it. Today's move brought the stock up to near the top of the 6 month range and higher in the after hours session. The results were quite robust, compared to previous quarters, and sent the stock surging 10% in the after hours market. Revenue of $2.8 billion was better than expected, leading to less than expected loss of -$0.75 versus the expected -$0.93. The store reported same store sales growth of 6%, also better than expected. This stock has apparently gotten back on track and now holds the potential to make another gain in the current quarter. Nordstrom, who also reported after the bell, beat their expectations on the top and bottom lines. Comp store sales increased and are above estimates and full year guidance has been affirmed.


The Indices

The Dow Jones Transportation Average led the market today with a 0.67% gain. The trannies gained just shy of 55 points, rising from the short term 30 day moving average and breaking back above the 8,250 resistance level. The indicators are mixed at this time but in line with a bounce from the long term moving average as well as a snap back from near term bearish extremes. Stochastic has already given the early trend following signal and MACD is on the threshold of a zero line cross with today's candle. There is still resistance ahead but the trend line bounce is in full swing and gaining momentum. The next significant area of resistance is the current all time high around 8,500.


The tech heavy NASDAQ composite lagged the trannies in percent gain but is leading in terms of indicators. This index rose 0.43%, or 18.88 points. The signal here is a little stronger as MACD momentum has turned bullish in support of the early stochastic signal given earlier in the week. This index is also bouncing higher, from long term support, and looks set to tackle resistance at the current long term highs just shy of 4,500. The index has tested this level twice before, on a near term basis, and could spark some selling once reached.


The broader S&P 500 index also gained 0.43% today. This index gained just over 8 points today, climbing from the 30 day EMA. The indicators are in support of a trend line bounce but still in the earlier stages similar to the Transportation Average. Stochastic is showing the early trend following signal while MACD is still bearish but quickly approaching a zero line crossover. There will likely be some volatility when the index reaches resistance, just above the current level, which is coincident with the expiration of options tomorrow, another reason to suspect there may be some volatility. A drop from this level would find support near term support just below the current level with longer term support along the 1910 level and the long term trend line.


The blue chip Dow Jones Industrial Average was today's laggard with a gain of 0.37%. The index climbed over 61 points in an extension of its bounce from strong support but fell short of the 30 day moving average. The indicators are near identical to both the transports and the broader S&P 500 and indicate longer term support in line with prevailing trends. The bounce from the long term 150 day EMA is still in the early stages and requires further confirmation to get really bullish but appears to be in line with previous bounces from the long term moving average. Near term support is around 16,500 with resistance just above at 16,750.


The markets made a nice move up today and seem to be confirming the longer term trends. On a case by case basis the indices are bouncing from long term support of various degree with early signs of trend following signal. Going forward they are all still constrained by near term resistances in the form of technical levels and also geopolitics. Reassurances from Vladmir Putin helped the market today but can only go far. The Putin comments helped to lift market spirits but at the same time we still need to wait and see what he is really up to, and if aid will really reach those in need. We, I, have been burned in the past when Putin's bipolar antics caused the market to shift first one way and then the other. I am glad for him to be nice but only time will tell when it comes to him.

Looking past the near term Putin effect the economy is still chugging along. Economic trends are still positive and while jobless claims rose this week, are still down near long term lows and at levels that support the steady improvements in labor we have seen over the past 12 months. The markets are moving higher and the long term trends seem to be intact. Near term fears are present but are diminishing in favor the long term trends. The risk at this time is that the Putin situation will look entirely different in the morning, and that economic data will deteriorate.

Tomorrow there will likely be volatility induced by options expiration and it may be enhanced by a lack of volume. On top of expiration Friday there is also a fair amount of economic data on tap starting with PPI and running through TIC flows, Empire Manufacturing, Michigan Sentiment, Capacity Utilization and Industrial Production. Earnings, including the after hours reports from JC Penny and Nordstroms, will also be moving the market.

Until then, remember the trend!

Thomas Hughes