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Bad GDP...Bad Chicago PMI...Excuses Running Out...Market Yawns...Going Nowhere Big Picture...

Market Overview:

There are two different world's to write about each and every day with regards to the market. There's the real world and Disneyland. In this particular case the real world is the gdp that was reported in the red this morning. The number was anticipated to be negative so no big shock when that became a reality. The market futures dropped a bit but really nothing from nothing. The market anticipated a bad number due to the excuse of bad weather across the country during Q1. I think that's a terrible excuse but why not, let the market use it as an excuse simply because it doesn't want to fall very much. Now we fast forward to the present. We wait on the Chicago Pmi to see if business is indeed picking up. The number was well below expectations showing recession during April. No more weather excuses Mr. Market. Here's where Disneyland comes in. Who cares! The market fell a bit for a while but decided excuses were still the way to approach what's happening. Disneyland allowed the markets to recover off the lows. No big fall that would cause a little bit of technical damage. The market would have nothing to do with that. It said let's wait and see what the future brings as we just know things can't and won't stay this bad. Possibly more fantasy thinking but the market can do and think however it wants to. The bears have to be very frustrated over this behavior but that's nothing new. Although the market hasn't blasted out it still refuses to fall based on the continued headaches that are out there. You know the stories there. Bad weekly and monthly charts. Froth out of control for the better part of seventy weeks. Horrible economic numbers. The beat goes on yet the market refuses to fall with any consistency. It's hard to understand but the conclusion is the same. Low rates are forcing the hand of big money to stay in. Rotate around but stay in the game. For now the market is holding up when it shouldn't but we can only abide by the rules given out by the market. Think about how ridiculous it is and you'd be right but never fight price, no matter what! For now the bulls slightly rule the market.

If we go back in time to see where the market was months ago compared to where it is today it makes you laugh. An extended period of nowhere not seen in quite some time. A very narrow range is what we've seen and when looking back we see not only a narrow range but price that matches almost exactly where we were quite a ways back. When an index is trading in the two thousands it's hard to believe so much time can be spent going nowhere bigger picture. Sure, a few weeks to months makes sense but when you're going back to late last year it gets boring beyond what one would hope or expect. On December 29th of 2014 we had the Sp trading at 2093. On February 25th of this year we had the Sp trading at 2119. Look where we closed today. Absolutely ridiculous. We've gone almost literally nowhere for five full months. That can start to wear folks down one would think but with the bull bear spread still above 30% the market is still mostly quite complacent. Only two weeks out of the last year plus has the spread been below 30%. That said, emotion can kick in quite a bit when markets go lateral and cause folks to make bad trades simply because they need to play and playing too aggressively in this environment isn't necessarily the right way to play. The market has whipsawed its way to nowhere causing great frustration and to be blunt, there's still absolutely no sign of this trend changing. Adapt to what is, not what we think should be. Price talks and dictates. Adjust to it or get hurt meaning it's best overall to buy weakness, not strength.

Sector Watch:

It was a continued rough week for the Transport sector which was down better than 2% thanks in part to continued weakness in both the Railroad, Airline and Trucking groups. The sector cleared through our 8,550 Support Line seen in the chart below which opens the door for a possible sub 30 RSI tag before the group finds its footing. The Industrials fell decently today as well with some cyclicals like CMI falling quite hard with bigger moves than what we've been seeing of late in that group so something to keep tabs on for next week. The Semi's conversely saw a strong move this week thanks in part to the AVGO buyout of BRCM which lit a fuse on Thursday on much of the sector and most held up well on Friday. The Banks pulled back late week and the MACD on the $BKX Daily chart looks a bit tired here. Most groups fell some during the week mirroring the action in the broad market.

Looking Ahead:

If we can blow through 2134, or the recent double top on the Sp we can see the next leg up. If we can ultimately break down below 2040 on the Sp with a bit of force it would appear the bears are starting to take over. In between we're seeing the same old action of whipsaw with no real technical's to count on in terms of something consistent. The market has swung tirelessly between these two levels. It feels great at the top and it feels terrible at the bottom if you're bullish which most are. Don't give in to any of it. We are starting to see bearish behavior lately on down days with high put call readings. We had two readings well above 1.0 today which shows escalating bearishness. Good to see if you're a bull. Removes a bit of complacency. While the market plays with 2040 and 2134 or nearly 5% worth of room, keep it light and as emotionless as humanly possible. We are simply rotating to keep things up. That said, breaking out is tougher than anyone thought it would be so be smart and play accordingly.

S&P500 Daily Chart

NASDAQ Daily Chart

Dow Daily Chart

Banking Index Daily Chart

Dow Transports Daily Chart

SOX Daily Chart


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