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While the stock market managed a recovery bounce in the prior trading session and that action seemed to take down the recently revived macro economic concerns, talk of another round of Bank stress tests and news of rising commercial property defaults could eventually create an anxiety wave in the marketplace. However, with the market also facing ideas that many stocks are overvalued, that is perhaps a more critical bearish force in the short term. While a rising Dollar and interest in short term Treasury securities might be seen by some as a positive from the overall US situation debt, it is possible that rising yields in the fixed income sector will now begin to siphon off capital from the equity markets. We are not sure that the equity markets will benefit from news of declining US wholesale inventories today, but seeing lean inventories could be seen as a beneficial development. In the end, we are not usually that up beat toward the stock market in the face of a consolidation pattern that develops just under the highs. In fact, we continue to worry about an overbought COT positioning in the S&P and while we don’t see the scope for a sharp washout in prices ahead, we do think that more downside work is possible in the near term.
S&P 500: With the June S&P giving off a pattern of lower highs on the charts and the market recently posting a rather overbought COT spec long positioning, we have to give the edge to the bear camp. In fact, we see near term support falling down to 925.90 today, with even more critical support pegged down at 922.70. It also seems as if the S&P is destined to remain in a corrective mode, in the face of what is expected to be a decent US auction later today. In other words, we think the market will see some money migrate toward recently boosted Treasury yields. We don’t see a great deal of anxiety in the marketplace, but talk of valuation problems and an overbought technical condition would seem to favor the bear camp.
DOW: The Mini Dow has up trend channel support today at 8,482 off the March through present up trend channel, with slightly closer in support pegged at 8,669. Perhaps the Mini Dow will garner support from the idea that a number of Banks might be allowed to return TARP money and we also suspect that the Blue Chip stocks will see some temporary support off the US Wholesale inventories report. However, if the market can’t rally in the wake of the data flow this morning, that will suggest that the bull camp lacks the buying fuel to continue pushing up prices definitively. In the end, a light corrective posture looks to unfold.
NASDAQ: The June Nasdaq looks to be the most up beat of the actively traded measures, as prices remain within relative proximity to their recent highs. We think the Nasdaq could be undermined by news that Apple chopped the price of the IPhone in response to competition, as a price war might serve to reduce profits between the battling entities. However, if the lower price serves to spark a sharp jump in demand, that event could provide the bulls with a temporary theme. One has to leave the edge with the bull camp today, but the failure to hold above 1484 in the June Nasdaq could be fairly damaging to the bull case later today.
TODAY’S MARKET IDEAS: The path of least resistance remains down as the bulls have lost the buzz seen leading up to the payroll report.
