Friday, July 25, 2014

Stock Market Trends: A Wimpy Market – Higher Socks Today for Money Tomorrow

Monday, June 25th, 2012

The technical picture shows the emergence of a new uptrend as the recent pivot lows has been higher than the previous low. It sort of looks like walking upstairs, climb two stairs following a correction, and many chart observers feel that’s the start of a new trend.

If the market continues its journey up, the indexes are likely to revisit their 50-day averages of 2,910, 1,345, and 12,734 for the NASDAQ, S&P 500, and Dow, respectively. Now, if they get back up there, to confirm the uptrend, each member of the trio will have to surpass the highs achieved by the Dow of 12,837, NASDAQ 2,930, and, 1,358 for the S&P 500.

If the equity markets reverse before setting current trend highs, and fall below Thursday’s post-Bernanke blues lows, then the profitable run that began on June 4th could be in jeopardy.

While the technical picture is straightforward, the backdrop of economic news is muddled. Europe remains a mess, the NY Times says China is possibly making up their economic numbers to make things look better than they are, and report after report at home shows a diminishing economy.

Normally, all the worse than anticipated news strung together like the winning haul of a Bass Masters tournament champ would mean stocks are deep red; however, the specter of the Federal Reserve and central banks around the world injecting tons of liquidity  keeps stocks afloat with each passing disappointment.

In last week’s FOMC presser, Ben Bernanke said we’ll keep on twisting until the end of 2012, but no massive QE3, yet. Wall Street will get its welfare if things get worse. In an upside down way, the worse the news is, the more the Street’s computer models build in the Fed pumping in the digital dollars. Since the market is forward looking, bad news now means money tomorrow, and money tomorrow equals higher stock prices in anticipation.

TEN will dub this current market environment as the Wimpy Market, we will gladly pay for a higher market today for free money tomorrow.

And this week there will be plenty of news for algorithms to digest. Regional manufacturing reports dot the days of the week with Chicago already posting a less than zero result. New Home sales will be announced Monday. Tuesday brings consumer confidence. On Wednesday Durable Goods Orders hits the tape. Thursday is revised GDP and Jobless Claims and on Friday, Personal Income & Outlays.

It’s a big week for economic numbers. In a goofed up way, the worse the results, the more likely Wall Street will expect the Fed to act when it meets again on July 31 and August 1. The hope for monetary stimulus could keep stocks floating along, despite the economy putting it in reverse.

Finally, the US Supreme Court’s decision on Obamacare, due no later than Thursday, will impact health care stocks. InTrade suggests there is a greater than 70% the individual mandate will be seen as unconstitutional. If that’s the case, medical equipment stocks could pop. If the mandate is constitutionally caput, then the enforcement mechanism that’s the lynchpin of the Affordable Health Care Act could flush the entire law down the toilet.

That would mean the new-taxes on medical equipment and supplies goes away, and Wall Street is likely to see that as a positive. Investors might think about iShares Dow Jones US Medical Devices (IHI) as a way to profit if the high court says no to Obamacare.

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