Retail Sales a Picture Worth a Thousand Words--UGH (Chart)

Retail sales dropped .4 percent for the month and are down 10.1 percent year over year. Retail sales account for two thirds of GDP. This report is bearish on the market.

There is a strong relationship between GDP and stocks. This report really puts pressure on relative valuations. The risk of owning stocks is mounting as we pointed out last week in our article --They called me crazy, S and P 900-1000 (Part Two)

A major retracement to the downside is likely, and is imminent.

The bottom line. The risks out weigh the rewards at this level.

The S and P was trading near 925 when we wrote that. Now down 4 percent.

We will update the S and P numbers shortly.

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow E F Hutton on Twitter

They called me crazy, S and P 900-1000 (Part Two)

When I wrote Stocks Don't Fight the Tape the S and P 500 was around 768. I predicted a rally into the 900-1000 area.

I followed that up with They called me crazy, S and P 900-1000

What next?

• The stock market is currently overbought.
  
• The technical correction in the current bear market is two months old.
  
• A major retracement to the downside is likely, and is imminent.
  
• We could see additional upside to the 940 area versus the S and P 500.
  
• A test of the 840 area is likely.
  
• Once the correction gets underway we should get a better understanding of the structure of the market. Begining of long term bull, or bear market still in tact?
  
• The important 200 day average is still about 100 points above the market and the down ward slope of that average is becoming more severe. This is not a good sign.

The bottom line. The risks out weigh the rewards at this level.

This has been a tremendous rally that I expected. However, in terms of price and duration it fits the requirements for a correction in a market that is still trending down.

In addition, the longer dated treasury interest rates are turning up. This is a negative. The dollar looks very vulnerable right now. Another negative. The combination of rising rates in the long end and a dropping dollar does not bode well for stocks.

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow All American Investor on Twitter

S and P 500 Chart Update, Trend Intact

June S and P 500 Future, Chart, April 13, Pre Opening



Notes:

• Once again we bounced off the red line (plus two standard deviations) on Friday.
• The market continues to attach to the red line during the rally.
• The market continues to make higher highs and higher lows. A positive.
• The uptrend remains intact. The lines continue to rise and are containing the market.
• Retracements can come at any time.
• Expect hard resistance on any rallies toward 860 today.
• Support is rising, but still down to 800.

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow E F Hutton on Twitter

Kindle 2: Amazon's New Wireless Reading Device (Latest Generation)

Stocks the Nervous Norvis Market (Chart and View)

There are a lot of Nervous Norvises out there.

When the market moves down for a couple of days your typical Nervous Norvis bull gets sweaty palms and heart palpitations. A couple of days down and the bears are pounding their chest. The only thing the bears can think about is bad news. Left to wonder of course, why is the market going up with all this bad news--the world is coming to an end.



The Stock market is in a classic uptrend from the capitulation low.

Review:

• During the capitulation phase the slope of the market became too severe to maintain and the market hooked off the lows as should have been expected. See: S and P Monthly Chart indicates a sharp rally is coming soon. S and P 500 in the 676 area. See: S and P 500 Rally Comes as Predicted
  
• Next we got very bullish news that most investors missed. See--Stocks Don't Fight the Tape.
• It became obvious that the market was ready for a major technical retracement in a longer term bear market. See: They called me crazy, S and P 900-1000
  
• Since the uptrend started, above 750 on the S and P 500, the market has traded according to a textbook.
• A rule that worked--always buy two days down in an uptrend. You could have bought the market at the 768 area; and again, this week around the around 816 area.

At the moment:

• The market continues to make higher lows. The most important ingredient of a trend.
• The market found support on a dip three times. This indicates there are buyers below the market. This is necessary to raise confidence.
• Bears continue to try and sell the market. The big difference they are running for cover at the first sign of strength.
• The slope of the green line (midpoint, support) continues to point up and is strengthening.
• The blue line is picking up momentum and as long as this continues it will help propel the market higher,
• The market is once again approaching the red line (two standard deviations up) and this should be watched. Short term traders should resist the urge to buy the market when it is at, near, or above the red line. This is where nervous norvises really get killed.
• There is still substantial resistance from 850-875. This is where the market will likely wear out bulls who lack patience. They will get out and will likely start chasing it right into the top and before the next major test of the downside.
  

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow E F Hutton on Twitter

Kindle 2: Amazon's New Wireless Reading Device (Latest Generation)

S & P 500 Up 24.53 Percent in 20 Days (Chart)

S and P 500 Chart

• The S and P 500 has risen 24.53 percent in the last 20 trading days (close only).
• The S and P closed at 842.50 on Friday.
• There is substantial overhead resistance beginning at 850, all the way up to 875.
• Resistance, as measured by the red line (two standard deviations, up) is around the 865 area and is flattening but still moving up.
• Hard support is now well below the market around the 780 area. The slope of the green line (mid point of the range) continues to slope up. This is a positive.
  

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow All American Investor on Twitter

More from All American Investor

30 Year Conventional Mortgage Rate (Chart)

Top Hedge Fund Managers Make Billions in 2008

Systemic Risk Defined--Too Big to Fail

Ray Dalio on the current state of affairs in the market

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

Option ARM--The Toxic Mortgage

Warren Buffett's Annual Letter to Investors (Cliff Notes Version)

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

S & P 500 Trend Up, Shorts Vunerable

June S and P Future, Chart



Notes:

• The market held the down thrust below 790. The reversal indicates the uptrend is intact.
• Yesterday's outside, up day, with a close at the high indicated that a test of the resistance in the 830 area was likely.
• The ability of the market to hold above the green line is important and impressive.
• Short term support is at 770 and rising.
• Near term resistance is in the 830 area. Overhead resistance is at 857 and rising.
• Trades and or a close above 832 will test the will of the shorts.
• The market continues to trade up against bad news. Shorts continue to pile into the market believing that the market should be going down against this evidence.
• All I can say to shorts is---Don't Fight the Tape.
• Technical evidence continues to indicate higher prices.

See:

They called me crazy, S and P 900-1000

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow E F Hutton on Twitter

Subscribe to EF Hutton via Email

S & P 500 Stress Test for the Bears

S and P 500, Chart, Daily, Midday.



Highlights:

• It is early in the day but the market made a new low, below yesterday's low, reversed, and is now clawing its way back over 800. A positive short term development.
  
• The chart gap is still in play. The S & P needs to trade to 813.43 to fill the gap. This area should be watched closely.
• Trading is slow so far. However, it the market closes above that gap the bears will be forced to run for cover.
• A close above yesterday's high of 810.48 would give us an outside up day. That would be very bullish. It would also give us another hook up in the chart.
• We need to watch closely to be sure support is building below the market. A pattern of higher highs and higher lows is what we are looking for to remain bullish.

In spite of all the bear chatter and shorting in the market, the S and P is only 30 points from the high for this move--made last week. A move above yesterday's high will put extreme pressure on the bears.

Looks like a bear stress test to me so far.

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

More from All American Investor

• Systemic Risk Defined--Too Big to Fail


• Ray Dalio on the current state of affairs in the market
• Warren Buffett's Annual Letter to Investors (Cliff Notes Version)

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

S & P Case Shiller Home Price Indices Chart (Rated X)

Data through January 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, shows continued broad based declines in the prices of existing single family homes across the United States, with 13 of the 20 metro areas showing record rates of annual decline, and 14 reporting declines in excess of 10% versus January 2008.

Subscribe to EF Hutton via Email

S and P 500 Weekly Chart

On March 7, we posted the Monthly chart of the S and P 500 and pointed out the slope of the market was unsustainable and that a rally was likely. From that article,

You can see the slope of the market is very severe. This cannot be sustained much longer. When a market index trades down at a sharp angle like the one above (See March 7 chart), the market always rallies sharply when it reverses directions. This rally could start at any time.

Since then, we had two weeks up in the market as shown in the weekly chart above.

Now the question is what next? Technically this is a difficult question to answer. I would say this week is fifty-fifty. As you can see, the downtrend is still intact. The market is now above the blue line which indicates the severe oversold condition is not over. Overall, it is always more risky to be a buyer when the trend of the market is down--so it is still a time to be very cautious. I would also so, at this point the easy money has already been made on the downside. Toss up.

My best guess right now is that market is going to continue to consolidate and move sideways in the area between 663 and 800 before it makes its next move. On the fundamental side, I will be posting a new article entitled, Don't Fight the Tape, which makes an argument for additional upside in the market.

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

S and P 500 Current Bear Market (Chart)

This is a fabulous chart from dshort.com. The chart shows all the drops and rallies dating back to the S and P 500 market top on October 9, 2007 at 1565.15 (closing prices). Click on the chart for the bigger--dshort view.

Subscribe to EF Hutton via Email

Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

S and P 500 usually a good sale after two days UP

It is not unusual for a severely down sloped market to see a sharp two day contra trend rally. We are seeing that right now in the S and P 500.

Savvy short term traders should look to sell any rally into the 740-750 range on Wednesday night or Thursday. It is always a good idea to sell after two days up in a downtrend. Remember to limit your risk.

The inside day after the bottom, followed by a hook up does warrant some caution. It is possible that we could see an extension of the rally after a short pop down. The more significant resistance in this down trend is up above 800 right now.

The down trend remains intact. Those selling rallies in this monster downtrend that started in September have done very well. However, the downtrend has been in force for several months, and has come a long way. As the S and P 500 extends to the downside, selling the market becomes more risky. The easy money has been made on the short side time for the time being. Johnny come lately traders should keep this in mind. Savvy traders should be taking less risk in their trades at this point. This is not the time to get greedy or to get carried away with the madness of the crowd.

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from EF Hutton has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Follow E F Hutton on Twitter

Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

S and P 500 Rally Comes as Predicted (Chart)

On Saturday I wrote, S and P Monthly Chart indicates a sharp rally is coming soon. Well it didn't take long. Here is the view of the chart I included.


It was clear that the down slope of the market was too severe and could not be maintained.

I'll be back tonight with some ideas on what I see coming. I will say, an inside day, followed by a "hook" up does look interesting. Is this another two day rally in the big bear market, or something the bulls can really sink their teeth into?

Subscribe to All American Investor via Email

Bob DeMarco is a citizen journalist, blogger, and Caregiver. Bob wrote more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

Stock Market Crash--25 year look--Chart

The chart below spans twenty five years for the S and P 500. Each bar is one month.

I have been writing for two weeks about the downside range expansion in the market (see previous posts). The range expansion is still in force. Last time, I mentioned that the market rarely closes lower 7 days in a row and it was due for a rally from the 741 area. The rallies which usually last two days came and went like the weather in Amarillo.

I want to issue a major note of caution here. The formation above could be signaling a market capitulation. Think about it like flushing a toilet. You know what goes down the toilet=, but then the bowl fills right back up. My guess is, if flushed it will be a great opportunity. Markets rarely capitulate, however, when everyone is looking for it.

A look at this long term pattern shows that the market is extremely vulnerable. The fundamental news, especially the size of budget deficit continues to weigh on the market. The only question now is do we go down slow or fast.

For today, the S and P will find good support on any thrust under 732. So don't get nutty with the short positions.

This will be the third straight week down and sixth out of the last seven. This indicates the market is due for a good rally soon. But from what level? New shorts at this level don't make much sense.

clipped from charts.barchart.com

Follow EF Hutton on Twitter

Subscribe to EF Hutton via Email

Bob DeMarco is a citizen journalist, blogger, and Caregiver. In addition to being an experienced writer he taught at the University of Georgia , managed on Wall Street at Bear Stearns, was CEO of IP Group, and is a mentor. Bob currently resides in Delray Beach, FL where he cares for his mother, Dorothy, who suffers from Alzheimer's disease. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, BlogCritics, and a growing list of newspaper websites (15). Bob is actively seeking writing assignments and syndication.

More from All American Investor

Ray Dalio on the current state of affairs in the market

Homebuyer Credit Won’t Stabilize Market, Analysts Say

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

Six Errors on the Path to the Financial Crisis

Who Caused the Financial Crisis?

Option ARM--The Toxic Mortgage

Debt Binge--The Perfect Financial Storm

Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

Stocks: Down side range expansion continues--good trade opportunity

The downside range expansion continues and all systems indicate that market is going lower. You will notice the spike down to the 741 area in November. Will history repeat itself? I think to some extent it will. Traders should be on their toes for any spike below 741 overnight or early Tuesday morning.

I doubt we will see the monster rally we saw in November. But, looks good for a nice fat trade.

Complacent longs are still in the market and so far they have not capitulated. Sometime soon, very soon they are going to cry "Uncle".

clipped from charts.barchart.com

Subscribe to EF Hutton via Email

Any price action below 741 on Tuesday should show excellent resilience. The market should hold downside thrusts very well below 737.

Under 740 tomorrow favors quick, long side trades. If the market can muster a two day rally, it should be ready to start down with a vengeance. The market rarely closed lower 7 days in a row. These are rare times, however


More from All American Investor

Ray Dalio on the current state of affairs in the market

Homebuyer Credit Won’t Stabilize Market, Analysts Say

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

Six Errors on the Path to the Financial Crisis

Who Caused the Financial Crisis?

Option ARM--The Toxic Mortgage

Debt Binge--The Perfect Financial Storm

Restoring Financial Stability: How to Repair a Failed System (Wiley Finance)

Stocks Ready to Head down as Range Expands

If you would like to see more information like this consider signing up for the email list or for the RSS feed. If I find that people are interested in this kind of information I will spend more time putting it up.

clipped from charts.barchart.com

The chart above is a bar chart of the the S and P 500 index (cash). The green line is the twenty day moving average. The blue and red lines represent two standard deviations below and above the mean. When the market exceeds the red or blue line the market is overextended--oversold or overbought.

Right now, the market is oversold intraday--price below 777.00. As it a result, baring a disaster scenario, the market is likely to support at prices below this line today.

You should notice that the blue and green line are getting farther apart. Most times this indicates two things:

• the market is likely to get more volatile
• and, the range that the market is going to trade is expanding.
  

When the market range expands it becomes likely that the market is going to move up and down rapidly and the intraday trading is going to become more frenzied. This explain why markets often have violent rallies or dips that go against the trend of the market.

Right now, the blue line is sloping down at about ten points a day and is increasing--bad news. This means the market could be getting ready to make a new major move to the downside. In a scenario like this you should avoid two things.

• First, when the market is below the blue line resist the temptation to go short. More often than not you will get killed.
• Two, unless you are an excellent trader resist the temptation to buy the market for a position trade.
  

From a technical point of view the market appears to be turning down. Some people tend to think when the market gets oversold it is a sign that the market is going up. This is often true for a very short period of time. But, when a market is oversold more often than not it means the market is going to keep going in that directions until it finds a level of homeostasis.

My point. From a technical point of view the market is rolling over and weakening. When a market turns down the likelihood that it can go a lot lower increases dramatically. If the market is in a downtrend it will usually rally hard on good news and then drop right back down like a lead stone. Of course, if the market were to drop hard right this minute, it would likely bounce up nicely because it would be more than 2 standard deviations below the line---a statistical level that indicates the market has moved too far in that direction--short term.

You might also notice that the S and P has held the 800 level for months. The only exception to this was in November when it spiked down and then spiked right back above 800. This time around it has breached the 800 level and no longer is showing technical resiliency.

The market appears to be ready to go a lot lower. So it is a good time to be very cautious with your investments.

This is not an offer to buy or sell. I could be buying or selling the market at any time. The above examples are purely informational. I am not recommending anything. Buy, sell, or invest in the market at your own risk.

More from All American Investor

Ray Dalio on the current state of affairs in the market

Homebuyer Credit Won’t Stabilize Market, Analysts Say

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

Six Errors on the Path to the Financial Crisis

Who Caused the Financial Crisis?

Option ARM--The Toxic Mortgage

Debt Binge--The Perfect Financial Storm