Investors are like impatient children on a long car ride. Where are we going? Are we there yet? Unfortunately we do not know if we have reached the bottom of the current weakness or whether the market high on April 1st was really "Bull Fools Day."

We know that significant resistance is waiting at 2,075 and 17,750 on the major indexes. Last week was the worst market performance since February but the Dow and S&P lost only -1.2% and the Nasdaq -1.3%. That is hardly a major selloff.

The month of April is typically bullish with an average 2.3% gain over the last ten years. However, those gains are built on earnings expectations and the outlook this cycle is continuing to deteriorate. FactSet said on Friday that earnings are expected to decline -9.1%. However, Citigroup thinks estimates have become too bearish and they expect a 4% beat of those low estimates, or only a -5.1% decline for the quarter.

We also have the problem of declining GDP estimates that have fallen from 2.7% growth in early February to only 0.1% growth today. Add in seven Fed heads that have spoken over the last two weeks and suggested the rate hikes should come sooner rather than later.

The market has a lot of headwinds to go with that strong overhead resistance.

On the positive side the overextended market has faded and removes some of those overbought pressures and allowed profit takers to exit and new buyers to enter. While the selling may not be over the S&P has support at 2,020 and that should be our line in the sand. If that support breaks we could see declines to much lower levels.

So far the internals have not pointed to that kind of selling. Volume has been low and we have seen alternating days of gains and losses. That is typical of tops and bottoms where conviction is weak. If the market was going sharply lower we should see multiple days of declines on high volume rather than alternating gains and losses on low volume.

The price of crude oil is also going to be a factor. The OPEC meeting in Doha, Qatar is next Sunday. The headlines are flying and WTI is over $40 on Sunday night. This should help lift the markets, depending on the headline flow. While I believe the eventual meeting/agreement will do nothing to reduce the current production glut, the headlines could keep oil high until the meeting. Once traders understand that any agreement did nothing for production we should see prices begin to decline.

The economic calendar for next week is headlined by a lot of Chinese economics. The Asian markets are moving lower on Sunday night ahead of that first deluge of data. The next block comes on Thursday with Chinese retail sales and GDP. There is a full slate of 7 Fed speakers as well and they will probably continue their sooner rather than later message on rate hikes.

I did not add any new stocks to the watch list again this week. I would rather wait for a buying opportunity than continually buy the "top" of this rally. If we got that 100 point decline on the S&P there would be a lot of opportunities.

The S&P futures are down -7 points as I type this so unless there is a rebound overnight we should open lower on Monday. There is a lot of darkness before the dawn so anything is always possible.

Jim Brown

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