Bounce Attempt Mostly Stalls
- Bounce attempt mostly stalls, but SP500, NASDAQ still at the 50 day EMA after a short pullback.
- JPM earnings gin stocks up early but market shows it needs more to get it moving at these levels.
- Retail sales decent but on the slide even as gasoline prices surge. Demand destruction is underway.
- Q1 GDP likely to fall below 1%.
- Another commission to ignore. Obama delivers a partisan campaign (read budget) speech, calls for yet another deficit commission to ignore.
- Some leaders start to move higher as NASDAQ, SP500 size up the February high from the 50 day EMA.
MARKET SUMMARY
Stocks try to bounce, but the same sectors act as a drag, keeping NASDAQ and SP500 at the 50 day EMA, eying the February highs.
After three days downside the commodities bounced, helping push markets higher across the globe. JPM’s earnings helped gin up excitement a bit more with a strong profit showing.
Retail sales were up again, the ninth consecutive month of gains. That was one headline from one liberal leaning website. On another more conservative site the headline declared retails sales were the lowest since June of 2010. Both accurate, but both somewhat misleading. Alas retail sales are showing similar action as the rest of the economy: still some improvement, but well off the better levels as the economy continues to suffer a Greenspan slow patch.
And why wouldn’t it? Yes March retail sales rose 0.4% (0.5% expected versus 1.1% prior), but much of that was gasoline sales. Even as gasoline prices surge, retail sales are rising at a much slower pace. Thus even with gasoline prices rising dramatically, retail sales are falling. That means consumers are buying less gas and less other stuff . If you take out gasoline sales retail sales rose a bit more but still well off prior levels. Demand destruction for gasoline itself as well as other items is occurring, and with prices higher now than in March it will get worse. We said $110 to $115 was the choke point. Looks as if that is the case. Thus when I read the conclusion from one website that retail sales recovered after snowstorms mildly affected growth in January . . . [and] sales should continue on an upward path for the foreseeable future I cannot but marvel at the complete refusal to acknowledge surging gasoline prices and the associated decline in spending. Sure it has not flipped negative, but the drag on sales is obvious.
Back to the market. Early gains were flushed but the market managed to recover and post modest gains, all but SP600. Indeed SP500 was held back, closing basically flat, as the industrials, energy, metals, and commodities stocks struggled. Yes they bounced but barely after three gut punches the past three sessions. Definitely not enough to get SP500 up off the 50 day EMA. Both it and NASDAQ remain at the 50 day EMA, showing doji on the candlestick chart. They can certainly bounce from here and try the February high. they can also trade a bit lower to the February low that is not all that much lower.
Good action or bad? After three downside sessions you might expect a bit more backbone on a bounce attempt. On the other hand the indices showed nice tight doji at support. Some leaders started upside. Now we see if the rest of the market follows.
THURSDAY
Jobless claims, PPI, and earnings. GOOG after hours could make things interesting. Earnings are going to play the biggest role in terms of news the next few weeks, but of course with the geopolitical events, anything can raise its head on any given day.
Thursday, all things being equal, NASDAQ and SP500 are in position to bounce off their 50 day EMA. Question is whether the buyers step in and rally the indices back up. Industrials, energy, metals, commodities kept a lid on the rebound Wednesday, but techs and retail for example, are areas with some solid stocks already breaking to the upside. Leaders are important because they are leaders, giving you something of an inside look or an advance look at what the overall market might do. Wednesday we were picking up some of those leaders as they broke higher. Now we see if more follow and the indices have enough of a pullback to run at the February peaks.
