Cautious bulls were out today, timidly pushing the S& 500 to a new high.

Introduction

It wasn't decisive but the bulls were able to climb to new highs today. After trading flat for most of the morning and the market timidly crept up to touch, and then set, a new all-time high. The move received little fan-fare but is regardless worthy of note. New highs will often bring more new highs.

News from around the world was mixed, a trend that seems never ending. Chinese data reveals that home prices continue to fall, additional sign that China's economy is slowing more than predicted. The news left Chinese indices flat; the Japanese market gained 0.80%. European markets finished the day higher after a volatile session driven by, you guessed it, Greece. Signs have emerged that Greece is closer than ever to reaching an agreement with creditors but by no way is in the clear.

A letter to the IMF reveals that Greece was near to defaulting on its payment last week followed later by statements from the Greek government stating the need to reach a deal by the end of the month. Analysts think this means the country is near bankrupt and will have no choice other than to reach an agreement.

Market Statistics

Our markets were mixed in early trading, futures trading indicated a flat to negative open for most of the indices and that did not change for most of the early session. There were no economic data or earnings reports of note before the opening bell although Home Builder Sentiment, released at 10AM, fell more than expected.

Early action, after the opening bell, was light and hovered around last week's closing prices. After an hour or two of sidewinding it became clear the bears were not present today. At that point the bulls took charge and pushed the indices higher. Today's move was not large and did not come with a lot of volume but was able to move the S&P 500 to a new all time high, closing and intra-day.

Economic Calendar

The Economy

Moody's Survey of Business Confidence rose this week. The index gained 0.6 and is now sitting at 44.1. This is the first week in three for it to rise and puts it back near the all time high, set a few weeks ago. Mark Zandi, Moody's Cheif Economist, thinks the high levels of optimism indicate that the winter slow down is temporary. According to his report credit conditions and availability is good, as is outlook for the rest of the year.


The National Association of Home Builders released their index of home builder sentiment at 10AM. The index fell to 54 in May, from the previous 56 and expectations for it to hold steady or stand firm. Sentiment remains positive and expansionary, just not as expansionary as hoped. On a year over year basis the reading is 9 points higher than last year's May reading of 45. Within the report expectations for future sales rose by 1 point while buyer traffic slipped by 1. An NAHB spokesperson is quoted as saying “the second quarter of 2015 is shaping up to be pretty solid”.

There was no report from FactSet this week, they took a week off. This week does however loom large in terms of earnings. The rest of the retail, the bulk of them really, report this week led by Urban Outfitters today. The list is long and distinguished spanning the range from teen retailers to home improvement warehouses to mega-retailers like Wal-Mart and Target.

If the reports we saw last week, and today's report from Urban Outfitters, are any indication there could be some more poor reports this week. Tuesday look for Wal-Mart, Wednesday's line up includes Cato, Best Buy and Home Depot. Thursday wraps it up with TJMaxx. Today the retail sector Spyder XRT climbed above the short term moving average, moving up from long term support, with bullish indicators, but fell short of resistance at the $100.


The Oil Index

Oil prices held fairly steady today despite a down grade of long term prices by Goldman Sachs. Goldman now thinks that US shale production and OPEC will keep supply high enough to drive the average price of Brent crude down to $55 a barrel by 2020, this is 15% decline from today's prices. According to them shale oil supplies remain high and production will continue to become more efficient, which, along with high levels of OPEC production, is seen as being able to sustain demand into the foreseeable future. OPEC production remains high, and Iran has recently stated they have no intention of curbing production which underscores the Goldman outlook.

The Oil Index moved lower today, shedding about 0.20%. The index is drifting lower on light momentum after falling through support at 1,400. Now that the moving average has rolled over it looks increasingly like this index could continue lower. Stochastic confirms this with a bearish crossover of the lower signal line, an indication of weakness in the market. Bearish momentum is subsiding but could carry the index down to 1,350 or lower. Risk are geo-political events, namely ISIS and Iran. Resistance is just above the moving average near 1,400.


The Gold Index

Gold prices are hanging above $1220 and today spiked up to a new 3 month high. Trading was volatile with bounces from support before prices settled down slightly below $1225. Low dollar value and low expectation for FOMC rate hikes are helping to support gold; momentum is bullish and could extend prices to $1235 or $1250 in the near to short term. After last week's reaction to PPI, I am looking to the CPI on Friday to be a potential mover of gold and the dollar. Ahead of that the FOMC minutes on Wednesday afternoon are next on my list of potential catalysts.

The gold miners are getting a lift from the rise in gold prices but still caught in resistance. The miners ETF opened with a gain this morning but sold off after the open to create a black candle. Today's action was light, centered between my two lines at $20.46 and $21.15, consistent with a market slowly lifted by the moving average. The indicators are also supportive of a rising market and confirm the moving average bounce from last week. It looks like this one wants to go higher but has yet to break resistance. A break above $21.15 would be bullish with a next target near $22.50.


In The News, Story Stocks and Earnings

Anglogold Ashanti, operator of mines in Africa, reported a year on year increase in production, in line with the rest of the senior miners. The company also reported a 7% reduction in costs which helped to deliver earnings ahead of expectations. The company also reiterated full year guidance providing costs remain stable. Despite the news shares of the stock traded to the downside, losing a little less than -1%, and testing support along the short term moving average.


Urban Outfitters was strong in today's session, gaining more than 3% and regaining the upper side of support levels broken last week. The move was in anticipation of earnings scheduled for release after the bell. The news was not good and more than reversed today's gains. The company reported a shortfall in both revenue and earnings, which declined by one penny from last year at this time to $0.25. Shares of the stock sank more than -10% in after hours trading.


The market seemed to thing that forward outlook for home builders is more important than the past, and I agree. The XHB Home Builders ETF gained nearly 1% in a move that looks fairly strong, despite the drop in sentiment numbers. Today's action is the second of two relatively large white candles moving up from the the moving average in continuation of a support bounce starting near $35. The move is accompanied by bullish MACD which is strong and gaining strength. Stochastic also confirms but may be little extended in the very near term. Upside target is near $37.


The Dollar Index continued to show signs there may be support near $93. Today the index climbed from my support line and gained 1.14%. Divergence in MACD is what suggest support may be found here but there is not sign of any significant bounce. Stochastic remains weak and low in the range with little expectation for dollar strengthening activity from the FOMC in the next meeting, or two or maybe three. Unless the data starts to show more robust growth. This week the data will of course be important, the Fed Minutes and CPI at or near the top of my list.


The Indices

The Dow Jones Transportation Average led today's gain with an increase of 0.69%. Even with the extra strength it did not set a new high, or come even close. Today's action is a continuation of the long term trend line bounce which started last week. The indicators are rolling over in confirmation of this bounce so it could go higher. MACD has reached zero but has not quite crossed over yet, stochastic is moving higher after a bullish crossover. Targets are near 9,000 provided nothing this week derails the bounce.


The NASDAQ Composite made the next biggest gain today, 0.60%. The tech heavy index did not set a new high but it did set the second highest close of all time. The index appears set to test if not tackle its all time high and is confirmed by the indicators. Stochastic and MACD have both extended and gained strength following bullish crossovers made last week. Momentum is still weak and stochastic is overbought in the nearest term so resistance at the current all time high still provides significant risk.


The S&P 500 gained only 0.30%, less than half today's leader. Regardless the amount of gain the broad market moved up from the previous all time high and set a brand new all-time high. Today's move was not strong but it was steady and is accompanied by bullish indicators. The MACD and stochastic are both confirming the break out and a strong trend following entry. This move has a near term target between 2,150 and 2,000 with support at the previous all time high and the long term trend line.


The Dow Jones Industrial Average made the smallest move today, only 0.14%. The blue chips made the smallest move, but they also made a new all time high. The index is moving higher, in line with the underlying trend, and could extend today's move. The indicators are both bullish and in confirmation of the break out although weak in doing so. Should the market follow through on this move it could take the index up as much as 600 points in the near to short term.


The bulls did it, they pushed the SPX up above the previous intra-day high and set a new all time high. The move was not strong and it was not driven by any specific piece of news but it happened. The move is in line with the underlying trends and consistent with forward outlook. Earnings outlook is still positive going into the end of the year, this is supported in part by the Moody's survey and also in part by the NAHB survey, both consistent with long term trends in the economy. So long as this week's data doesn't change the outlook I see the market making more new highs.

Things to watch out for this week are economic releases, the FOMC minutes and earnings from the retailers. Economic releases are in four categories; housing, labor, manufacturing and inflation with the FOMC minutes tying it all together. I don't see much change happening in the minutes, they will likely have debated the wording of the statement, talked about the winter economic slow down and pondered future expectations... and will remain data dependent in terms of rate hikes.

The data may be a different story. The market has been patiently waiting for signs of the economic uptick predicted for the spring and summer. So far we really haven't seen it so housing starts, building permits and existing home sales will be especially important, and in particular forward expectations. Labor trends are still positive so I don't think any bad news is coming there. The CPI could be a real market mover is last week's PPI release can be used to judge.

Until then, remember the trend!

Thomas Hughes