Tomorrow is quadruple witching but no economic reports to navigate.

The sharp move up into the close looks like a c-wave of an a-b-c bounce off this morning's low. The trouble is I'm not sure yet how that fits into the larger pattern (it's a big correction vs. the quick move down). But for the short term it does look like a setup for an immediate move down tomorrow.

Just another manipulated day in the market. It's so obvious and a reason to stay away during opex. I feel a flying vacation coming on next month.

Wow, what head fake! Look at the VIX, geez.

You've got to hand to them. These guys are good. QQQQ is going to close at EXACTLY 47 and SPX is going to close at EXACTLY 1115.

Scott, you were asking earlier about AAPL. I scooped up 10 contracts of the July 290/300 bear/call spread. Got $1750 for them. If it takes a real dump down I might add a bull/put spread to the mix.

This is exactly why SOH is best on days like today.

Here come the lifters again. They are now pushing SPX back above its 200 DMA. It looks like they are trying to pin the Qubes (QQQQ) at 47. I would look for the markets to be held up through the first hour tomorrow. After that, it's anybody's guess. My guess is that they let it drop.

Oops, whew, that was close--the market almost got away from them. Nothing a quick buy program can't take care of. Then back to their TVs.

There is a lot of supply between 1,105 and 1,107 on the ES's. I would be surprised to see a bounce get through there.

The markets are back into their overnight ranges. I knew this was going to be a difficult day to trade. Overnight ranges

I can't get a read on the AD volume absolute number other than it is above or below 0, which for volume isn't telling you too much. So I use the ratio for the volume to tell me just how much below/above 0 it is.

Scott here is how TS defines AD ratio, "The Advance-Decl Ratio indicator calculates the ratio of advancing issues to declining issues and plots this value. The relationship between advancing issues and declining issues is known as market breadth. For example, if a stock market index is rallying but there are more issues declining than advancing, then the rally is narrow and much of the stock market is not participating."

The multi day trend lines look like they may be breaking and the internals are confirming. Now that the big boys have settled/rolled their positions maybe they will let it go.

Yesterday I had pointed out the price projection at NDX 1912.76 where the A-B-C bounce off the May 25th low would have two equal legs up. It's either bullishly consolidating at this level or it's getting ready to tip over. Considering where we are in the wave count I believe it's going to tip over and start the big 3rd wave down. NDX 60-min chart

One bearish possibility about today's pattern comes from the NDX, which made a new high this morning while the others did not. That means the move down this morning has now been followed by a 3-wave bounce and it's tipping back over. That could mean we're starting a larger c-wave or 3rd wave down so once again a break to new daily lows could see some acceleration in the selling. The lower highs this morning for the others could have been truncated finishes to their rallies as well.

Jane, I don't follow the AD ratio. Is the calculation advancers divided by decliners, or something different?

Interestingly though Scott, although the AD volume is making new daily lows, its ratio is not. That's not anything I worry too much about because the ratio is so bearish but it is interesting.

UVOL - DVOL is at the low of the day and VIX is exploding, again.

Yep Keene, I've got so many trend lines on my chart it looks like spaghetti = SOH.

One thing I will add is the SPX refuses to give up the 20 SMA on its hourly chart and there are two trend lines just below it. So even if it does break the 20 the decline could be short lived. SPX hourly is a little different than the ES hourly.

SPX 1114.54 held (OK, it hit 1114.67) so we're trapped. It's not looking like the market is going to go anywhere, which is no surprise. Grab those cheeks and sit down.

Gold closes at an all time high, 1249 but it didn't trade to an all time high, that record was made on June 8th with a print of 1254.50.

Intraday Market Update

After initially shedding -6 points from Wednesday's closing print the S&P 500 futures proceeded to bounce +14 points overnight, reaching a high of 1,117.50 just before the 8:30 AM jobless claims report. Then the futures took a hit after both initial and continuing weekly jobless claims rose over last week's figures, which were also revised higher again, creating more doubt over the health of US employment outlook. Nonetheless the US equities opened near breakeven and even spiked higher in early trading. However, stocks took a nosedive after the Philly Fed Manufacturing Index tumbled much more than anticipated. Stocks have pared some of the losses and are trading in the middle of their morning ranges. All of the major indexes are down about breakeven. The EUR/USD currency pair peeked above 1.24 for the first time since May but has since backed off as European leaders are meeting for a summit today to discuss their sovereign debt crisis.

Weekly initial jobless claims increased +12,000 to 472,000 compared to 460,000 last week, which was revised + 4,000 higher. Consensus estimates called for claims to decrease to 450,000. The four week moving average which smoothes the trend in claims fell by -500 to 463,500. However, continuing claims increased +88,000 to 4,571,000 compared to estimates calling for an increase 4,500,000. Although the outlook for the US economy has been improving, employment growth is a necessity for a healthy recovery and we are clearly not getting it.

Meanwhile, the reading of business activity in the mid Atlantic region as measured by Philly Fed Manufacturing Index fell from 21.4 in May to 8.0 in June. The forecast was for a slight decrease to 20.0. A reading of zero is the breakeven point between expansion and contraction so this was a big decline. Shipments declined slightly while the employment index fell below zero, adding to further concerns about the future of the US employment picture.

The unfavorable economic data overshadowed the good, at least good on the surface. The Leading Economic Indicators came in at 0.4% compared to -0.1% the prior month. The headline number looks good but the gains are centered on the yield curve which has a wide spread between short and long term rates. Another large contributor to the positive number is an excessive money supply which is hard to measure and volatile. Positives included the factory work week which was confirmed in yesterday's industrial production report.

In equities, J.M. Smucker announced strong earnings and guidance and shareholders are being rewarded as the stock is up almost +7%. Supermarket chain Kroger beat expectations and reiterated its 2011 outlook. Shares of KR are up +3%, but are off their highs and heading lower. Smithfield Foods reported slightly higher than expectations but offered cautious comments on its guidance. SFD is down -5.8%. Consulting services and data provider IHS (+5.4%) reported earnings ahead of estimates. Pier One Imports reported a profit compared to expectations for a loss. PIR was higher by +8% but has backed off and is now up +2.5% mid morning. Winnebago crushed earnings expectations but the beat was mainly due to a one time tax benefit. The firm's revenue were slightly below estimates. WGO was up more than +18% but has since pared the gains and is higher by +11.50%. Health insurance name Aetna is up nearly +4% after offering strong guidance saying it would exceed consensus estimates in its Q2 report. Steel Dynamics (STLD) lowered their Q2 guidance from EPS $0.20-0.25 v $0.35e. STLD is down -2.50%.

Commodities/Currencies:

The larger than expected build in weekly crude inventories yesterday seems to be affecting crude today as it has shed over $1. Gold, silver, and natural gas are gaining while copper is under pressure.
Link

Core Sector List:

Overall reading: 12 sectors declining, 4 sectors advancing

Strongest Sectors: Gold Miners, Utilities, Insurance

Weakest Sectors: Home Construction, Retail, Broker Dealers

Link

S&P 500 - Daily and 30-minute Intraday Charts:
Link

Dow Jones - Daily and 30-minute Intraday Charts:
Link

NASDAQ - Daily and 30-minute Intraday Charts:
Link

Russell 2000 - Daily and 30-minute Intraday Charts:
Link

SPX 1114.54 is where the bounce off this morning's low would have two equal legs up so anything higher than that could lead to a new daily high (and a run to 1120?). If it turns back down from the 1114.54 area we could simply stay trapped in a consolidation pattern for the rest of the day.

The VXO is now making new daily lows. We'll have to see if the VIX follows suit.

It's looking like a strong effort just to hold the market still so that SPX can comfortably settle above 1100 tomorrow morning. It's simply not a good time to trade, unless you like being the punching bag (feels good when it stops at the bell?).

VIX is collapsing now and has broke the upward trend from yesterday afternoon. This is now chop now so you have to trade it quick or stay out, IMO.

When looking at the AD volume I can't get a feel for the absolute number, like I do from the AD line's absolute value, so that's why I use it's ratio. The AD volume ratio is currently 0.34 and the AD line's ratio is 0.58 so the AD volume is more bearish than the AD line. Since the AD line is -817, bearish but not to the point where I would be adding to any short positions, you can kind of get a feel for where the AD volumes sits.

The only internal that's not bearish is the VIX but that seems to be enough to keep the market from making new daily lows.

Bulls need to be very careful if we get new daily lows from here. Opex buying could turn into opex selling with a vengeance.

UVOL - DVOL is declining and at the low of the day.

I'll add that it is OPEX tomorrow so all of this doesn't matter if a big buyer steps in. I'm sitting on hands.

On the ES 15 minute chart there is the 50 SMA, 20 SMA, and pivot all overhead between 1,108.25 and 1,108.75 (see shading on chart). Plus there is a prior support level from yesterday afternoon. The VIX seems to be making a series of higher lows since yesterday afternoon and the UVOL - DVOL is near the low of the day and certainly isn't bullish. This seems like a lot to get through, IMO. Earlier we bounced off the trendline that started with the lows from 6/10. If that breaks watch out below.

ES 15 MIN:Link
Internals:Link

The VIX is almost to new daily lows but the SPX is not anywhere near its daily highs. It is getting to be a more difficult trading today than I anticipated. Of course, we have to consider the VIX is going to be at its least reliable today and tomorrow so that only adds to the confusion.

I knew this would be a tough day to trade but geesh come on folks let's pick a direction. The TRIN and VIX were at odds this morning. The VIX was bearish but the TRIN bullish. They are still at odds but the VIX is bullish and the TRIN is bearish. Go figure.

The bounce back up is already larger than it should be if we were to see a little sideways 4th wave consolidation. It has overlapped yesterday afternoon's low and so far that leaves the decline into this morning's low as a corrective 3-wave pullback. The bearish interpretation is that we've started a 1-2, 1-2 wave count to the downside which calls for some hard selling next. A break to new daily lows from here would be immediately bearish. Otherwise we have to still give the bulls the nod until proven otherwise.

I gave a wrong RTH ES pivot point earlier, sorry. It should be 1,108.75, not 1,107.75.

Wells Fargo Cuts DTV to Market Perform from Outperform, price target: $38-40.

We've been waiting for a $37.20 trigger to buy DTV in our model portfolio. We still haven't been triggered yet but if the weakness keeps up today we might. My thought process was to play a bounce off of the 50-day SMA on a strong stock, despite the market weakness. If we are not triggered today I may consider dropping the play tonight but haven't made my mind up yet.

If you guys have any thoughts please speak up. DTV Daily: Link

More ES pivots (Reg Trading Hours): S2 = 1,097, S1 1,103. Hopefully we won't need these: PP = 1,107.75, R1 = 1,115

One more new low around SPX 1104 should set up the larger sideways correction (an hour or two) or the start of another leg up. Which it will be will then tell us beaucoup about what's next.

Larry McMillan now has a FaceBook page. Here is his last post, " The implications of the 90% up day on Tuesday were that Wednesday or Thursday would be a sharply down day. It didn't happen on Wednesday, but it still might today."

SPX has already plowed through the level where it had two equal legs down from yesterday's high, which was at 1109.24. It's now reaching towards the level where the 2nd leg down would achieve 162% of the 1st leg down--at 1103.98. So far the move down from yesterday's high is only a 3-wave pullback and as such could lead to another push higher. But if SPX finds support at or above 1104, consolidates for an hour or two and then drops lower again we'll get a 5-wave move down to tell us the trend has reversed back down. Then the setup would be to get short the next bounce that corrects the 5-wave move down. So don't rush any trades here; sit back and watch for a bit and we'll see what sets up this afternoon.

Maybe Scott (AAPL). I think I would be comfortable writing a bear/call spread on it for July. You could always add a bull/put spread later (making it an Iron Condor) if it punches back through $272.

Gold is now up $17/oz and taking another run at resistance but, like I said earlier, the MACD is suggesting that test will fail.

John, that could be a double top or even turn into an evening star reversal pattern depending on the close and if the stock confirms lower tomorrow. Those are two fairly powerful reversal signals. Time to short AAPL??

AAPL hit $272 and bounced right back.

The 200 DMA for SPX is 1109.56. SPX is trading back below it (after breaking above it on Wednesday). Bulls need to get it back above, if it is to provide support.

I've got the S1 pivot on ES at 1,103.

*S1

EIA NATURAL GAS INVENTORIES: +87 BCF VS. +85 TO +90 BCF ESTIMATE RANGE.

About in line with estimates but NG is getting hit.

More guidance warnings. Jim has talked about this many times over the past week or two.

Steel Dynamics Inc Guides Q2 EPS $0.20-0.25 v $0.35e

Yields (TNX and TYX) have broken below last Friday's lows. The equivalent low for SPX is 1077. This week's rally in the stock market, which we know had some false buying pressure (especially during the overnight hours), was done without the benefit of higher yields (selling in bonds) which was a non-confirmation of the stock market rally. It did a good job convincing many though that the bull market had returned, just as 2nd wave corrections do. The bulls aren't dead yet but this morning's economic news certainly has deflated their arguments for a higher rally.

The Federal Reserve Bank of Philadelphia index suggests manufacturing activity in the Philadelphia region continues to expand in June, but at a slower pace than in May. Surveyed firms reported no expansion of overall employment and work hours compared with May and less firms are reporting increases in prices of inputs this month. The survey's broad indicators of future activity continued to suggest that the region's manufacturing executives still expect growth in business over the next six months.

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased notably from a reading of 21.4 in May to 8.0 in June, the lowest reading in 10 months. Consensus was for 20, a big miss. Although still positive and suggesting growth, indexes for new orders and shipments showed a mixed pattern this month, the new orders index increased 3 points, while the shipments index decreased 2 points. The current inventory index increased 13 points and moved back from a negative reading into positive territory, suggesting an increase in inventories this month.

Up until this month, manufacturer's responses to the survey had been suggesting that labor market conditions were improving, but indexes for current employment and work hours were both slightly negative. For the first time in seven months, more firms reported a decrease in employment (18 percent) than reported an increase (17 percent). The largest percentage (62 percent), however, reported steady employment levels. The workweek index also declined into negative territory, its first negative reading in eight months.

Home Construction, Retail, and Semiconductors are getting hit hard. I wanted to short Semi's yesterday but couldn't pull the trigger.

Obviously it was the Philly Fed report that spooked the market. This was not a good report.

One thing that's clear now is the break of the uptrend line from June 9th, the bottom of the rising wedge. We could see an attempt to push the market back up and retest that trend line, currently near SPX 1116, but the risk for longs now is a quick move back down to the start of the wedge--1052.

We are short MHK at the open in the PI newsletter. The stock is already down -2.50% and looks like it wants to fill a gap which is another -2.50% lower. Its already in the gap.

SPX dropping below 1112 is not a good sign for the bulls. Unless we've got a larger corrective pullback in progress, it's looking like we might have seen the high for the bounce. But I'll want to see some proof with an impulsive decline. It's hard to trust a move down today considering the effort to push the market up into opex. But maybe that's exactly why it will drop--too many expecting it to stay up. Ah, the mind games we play.

Internals are deteriorating quickly at least most of them are but the TRIN is stubbornly remaining below 1.00.

Before I get to the Philly Fed Index, I wanted to mention the TRIN is now printing under 1.00 and not supporting the bearish VIX.

According to the Conference Board, the Leading Economic Index increased 0.4 percent in May, following no change in April, and a 1.4 percent rise in March. Consensus was +0.6 percent. Five of the 10 indicators that make up the index rose in May, with the largest positive contribution from the interest rate spread. The largest negative contribution came from stock prices.

"The index points to continued, though slower, U.S. growth for the rest of this year," says Bart van Ark, chief economist of The Conference Board. "Public debt and deficits weigh heavily on growth prospects on both sides of the Atlantic. We project a serious slowdown in European growth in 2011, which could further weaken the U.S. outlook."

"The LEI for the United States has been rising since April 2009, and though its growth rate has slowed in 2010, it is well above its most recent peak in December 2006," says Ataman Ozyildirim, economist at The Conference Board. "Correspondingly, current economic conditions, as measured by The Conference Board Coincident Economic Index, has been improving steadily since November 2009, thanks to gains in payroll employment and industrial production."

I don't have to look at the reports the VIX just told me they were not good. VIX spiked up.

If the Philly Fed index is above 0.0 it indicates improving conditions, below indicates worsening conditions. Although this survey can have a relatively mild impact because it's released a few days after the tightly correlated Empire State Manufacturing Index, this environment makes it very important.

Leading Indicators is a combined reading of 10 economic indicators related to employment, production, new orders, consumer confidence, housing, stock market prices, money supply, and interest rate spreads.

I wouldn't be in a trade with these two reports due. The leading indicators is mostly a recap of reports we've already seen but the Philly Fed is a market mover.

Remember at 10:00 we have May's Leading Indicators and June's Philly Fed Index.

VIx is now making new daily highs but the TRIN is making new daily lows. Of course the VIX holds a lot more importance but since the AD line and volume are not in agreement either today, I'm on the sidelines.

I went short yesterday and held on all day and closed my position at almost break even. I'm afraid today is going to be even worse.

Apple Computer (AAPL) is plowing ahead again today. It is just one point shy of $272 where it found big resistance the last time.

ES 1107.25 would be two equal legs down from the 8:30 AM high so if the quick pullback is to lead to another push higher, watch for support around that level (about SPX 1112).

The internals are all over the place. The TRIN is bearish at 1.35, the AD line is neutral at +507, the AD line ratio is 1.23 but jumping up then down again and the VIX is neither climbing nor falling just meandering. It may be a long day today.

John, shh, I'm really going out on a business trip, yea, that's it.

I suspected the AD line would be quite bearish this morning but it opens at a relatively bullish +925.

Have you ever noticed that Keene sometimes reports that he has to "step away" for a couple of hours? Would you like to know what he is doing? This is what. Keene's Toy

Gold is back into rally mode but I don't think its going much further than the May12th/June 8th resistance even if it does test that resistance again. Each time a resistance or support is tested it becomes weaker but the MACD is telling me there is just not enough power behind the buyers to break that resistance.

Don't get me wrong, I'm a Goldbug but the charts are just not supporting new yearly highs, no matter how badly I may want them to. Daily Gold

Crude is taking a breather here but as long as it remains above the Dec 14th/Feb 5th support I will remain bullish. If it breaks that support then I will move aside and wait and see. If Crude breaks the June 7th low then I'll turn back bearish and have to buy Keene a cup of java. Daily Crude

It looks like the overnight session was pretty wild. The markets were trading under their previous day closes (dotted green line) then rallied to above those closes, where both the DOW and NDX futures were even able to break their respective previous day highs, but the sellers arrived and brought the markets almost back to their previous day closes. This means we will probably not have much of a gap either way. Overnight Session

The all-hours pattern for ES supports the idea that we'll get a dip that stays above the overnight low of 1103.50 and then one more new high today to complete the rising wedge pattern (and supports the idea that the market will be held up today). A break below ES 1100 would suggest the high is in place. ES 120-min chart

The U.S. current account deficit, the combined balances on trade in goods and services, income, and net unilateral current transfers, increased to $109.0
billion in the first quarter of 2010, from $100.9 billion in the fourth quarter of 2009. The increase was the third consecutive quarterly increase since the deficit of $84.4 billion in the second quarter of 2009, which was the smallest deficit since the third quarter of 1999. The increase was more than accounted for by an increase in the deficit on goods. An increase in net unilateral current transfers to foreigners also contributed. Increases in the surpluses on income and services were partly offsetting. Consensus was for a 120B deficit.

U.S. Bureau of Labor Statistics reported today, in May, overall CPI inflation fell 0.2 percent, following a 0.1 percent dip in April. The latest number matched the market expectations.

For the second month in a row a decline in the energy index accounted for the decrease in the headline index. The energy index fell 2.9 percent in May and more than offset a slight increase in the index for all items less food and energy. The food index was unchanged. Within the energy component, the gasoline index accounted for most of the decrease, although all the major energy indexes declined.

Excluding food and energy, CPI inflation rose 0.1 percent, following no change in both March and April. Analysts had projected a 0.1 percent boost in the core rate.

Year over year, the CPI is up 2 percent and the core CPI is up 0.9%, matching April for the lowest year-on-year increase in 44 years. This report shows inflation will not get a foothold as long as the unemployment rate remains near 10% and there is still significant idle capacity throughout the economy. The FED's top priority now is to ramp up the economy and bring down the unemployment rate. Inflation is not an immediate concern.

In another example of "someone" not caring to hide their actions, futures were blatantly manipulated higher again, lifting ES 14 points from the 3:00 AM low (right on time again) to its high at 8:30 AM when it sold off some following the disappointing unemployment and deflation numbers. Someone must clock in at 3:00 AM and just start buying. That's their job and I must say they do it well. Once we get through opex we should see more of a "real" market again.

ES sold off about 6 points, currently trading +1.50, and we could see the market open flat. But those lifters are probably not done--they've got to protect this week's gains through the end of today.

Gold keeps getting jammed higher (1245).

CPI was right in line with estimates.

The jobless claims number (12,000+) took a little spring out of the bull's step, but they still seem undeterred. They are going to keep this market propped up (no matter what).

Once again, Jobless Claims disappoint, and prior week revised higher again.

INITIAL JOBLESS CLAIMS: 472K V 450Ke; CONTINUING CLAIMS: 4.571M V 4.500Me
Prior initial claims revised higher from 456K to 460K
Prior continuing claims revised higher from 4.462M to 4.483M

Here is the chart that I failed to attach to my last post.SPX

Ho Hum - same old drill. Futures traded down overnight with ES hitting a low of 1103.5. Then at 4:00 AM (just like clockwork) the lifters showed back up and jammed it higher (up 11 points as I type). It is now trading very close to yesterday's high. The high yesterday for SPX was 1118.74 and it looks like it will open in that vicinity.

I'm not really sure how you trade this. Trying to short this market lately has been painful (and unsuccessful). However, I don't think it has enough upside potential to risk a long either. A manipulated market is always tough to trade and it is especially difficult during a quadruple-witching week. The big players obviously had a bullish agenda this week, but when they decide to take their chips off the table and leave the game (which could happen as soon as tomorrow morning) the market could (and probably will) collapse. There is no retail participation in this rally.

As Keene pointed out last night, we are in a rising wedge pattern (since June 8th). It could go on longer, but when it breaks down it could get ugly. As the attached chart illustrates the last rising wedge took three months to build but when it broke down it only took three weeks to retrace all its gains.

Tomorrow's economic reports includes the 8:30 initial claims for 6/12/10, forecast 450,000, May's CPI, forecast -0.2% and Q1 Current account, forecast -120B. Then at 10:00 is May's leading indicators, forecast +0.6% and June's Philly Fed Index, forecast 20. The day is filled with landmines.

Thursday's pivot table

SPX finished with a little doji star at the top of its run. If Thursday is a down day then we'll have a reversal signal. If Thursday is an up day then the doji will only have signified an indecision/consolidation day. SPX formed its doji right at potential resistance near 1115, which has acted as support/resistance since November 2009. Bullishly it used its 200-dma as support but until it can close above 1115 it remains potentially bearish here. SPX daily chart

The leg up from June 8th, which fits as the c-wave of an a-b-c bounce off the May 25th low can be satisfactorily counted as complete, the same as yesterday. It almost broke down from its rising wedge pattern but a last half hour buying spurt saved it. If the bulls can charge higher on Thursday we could see it drive up to a Fib projection at either 1126.66 or 1136.81. I wouldn't be surprised to see SPX settle around either 1100 or 1125 for opex (it stops trading at the end of the day on Thursday). This is the challenge with rising wedge patterns--they can go on and on and on and we just have to wait for it to break down. Once it does break down, if the rising wedge pattern is correct then we'll see a quick return to its starting point which is near 1050. SPX 30-min chart

The RUT is in the same a-b-c bounce pattern and on Wednesday came very close to tagging its broken uptrend line from March 2009. If it pushes a little higher on Thursday that trend line will be near 675. The pattern can be called complete at this point and therefore a down day on Thursday would suggest we've already seen the end of the correction, which will have us starting the 3rd wave down. RUT daily chart

The RUT's 120-min chart below shows the a-b-c bounce pattern and the 5-wave move up for the c-wave. It can certainly press higher but at this point I think the bulls are pressing their luck to hang on for more. RUT 120-min chart

In the 30-min chart below, a closer view of the c-wave, the leg up from June 8th, shows a parallel up-channel which the RUT broke below marginally near the end of the day. I'm not fond of the internal structure of the 5-wave move up and it may turn out to be a complex triple zigzag for wave A of a larger A-B-C bounce but I won't have a feel for that until after the next pullback/decline. But for now, any further drop on Thursday would say we've seen the high. Otherwise watch for a move up at least to the little trend line along the highs since June 14th, which is near 675, the same as the longer-term uptrend line from March 2009. RUT 30-min chart

Market Monitor Archive Link: Click here

Market Monitor Archive Link: Click here