SUMMARY:

- Wednesday builds upon Tuesday afternoon recovery with some nice price bounces but lagging volume.
- SPLS results show economy is not healthy.
- FOMC Minutes discuss at length how and when the Fed will tighten policy, but it is not going to do it in June.
- Waiting for the market to rally along with the dollar.
- Leaders bounce nicely, and any renewed breakout is up to them.

MARKET SUMMARY

A nice break higher as leaders take the point in trying to regain the breakout.

The stock recovery Tuesday had the look of a reversal, and buyers jumped in Wednesday, pushing the indices to solid gains.  The growth indices led the move with NASDAQ, SP600 and SOX posting gains over 1%.  SP500 and DJ30 bounced nicely off the D point in ABCD patterns, holding the 50 day EMA as they did.

Leadership jumped nicely with market leaders from many sectors rallying.  Some such as APPL and CAT look much like relief bounces.  Others look very much as if the stocks want to continue strong moves.  JBHT, KLIC, NTGR, RVBD, PPO, IIVI, etc. all surged off of typical pullbacks from good moves and look ready to continue their runs.  As noted Tuesday, much of the success of any bounce attempt (meaning this one), rides upon the success of those leaders.

THE NEWS

The news of the morning was rather light.  Earnings were mixed yet again.  There were beats as this season has steadily shown (TGT, ANF, DELL, DE), but there was a big miss: SPLS.  This office supply chain missed expectations and cut its full year outlook.  SPLS is part of a group of small business suppliers that is something of a canary of small business health as small businesses are the primary customers of these chains.  We always look for them to improve as a sign of small business health.  They are seeing their earnings fade in the midst of a supposed recovery and that is a sobering statement about where this economy is heading.

THURSDAY

Plenty of data.  Weekly jobless claims will try to make it six straight over 400K (and who at the Administration is crowing about jobs?), existing home sales try to exist, the Philly Fed tries to turn the tide back after a woeful New York PMI, and the Leading Economic Indicators try to lead higher.  All that said, the expectations are not grand, and given the action in the economy in Q1 and well into Q2, the numbers likely won’t improve.

That, however, is not new for the market.  It has suffered a slowing economy since Q1 and has continued to rise, though it has been choppier and uglier overall.  No straight shot higher, but not a collapse: a base from February through April, a breakout, and now a test with an ABCD pattern on SP500, DJ30, and NASDAQ.

Okay so things are set up . . . again.  Can the indices continue higher despite the weaker Wednesday volume?  Can the leaders that are in great shape and are bouncing with great moves lead the way to a new rally high?  Those are the questions we all want answered but only the market will show us.

The action has been less stellar than it was on the strong runs higher off the bear market low.  But the action has still been profitable though we have made some money on the downside this time as well as the upside.

Right now the market leaders to this point are leading once more.  Great moves on Wednesday.  The indices are a big more haggard but the trio above have the good consolidation pattern and started upside.  For now all we can really look for is a move back to the prior rally high.  That is what an ABCD pattern gives you as a primary target, and with the lower volume rally on Wednesday, for now that is all I am looking for.  That move can make us money and that is why we were buying into great stocks today.

With so many moving well on Wednesday a lot of stocks have already started their next moves higher.  If the April peak is the target then you don’t want to get in on positions too late.  There are still stocks in position to move and we can still look at those as vehicles to ride higher and make money, but the window to the upside will close rather quickly unless the market starts showing a lot more strength, i.e. some more volume to go along with those strong leader moves.

Thus there are still some buys we can make, but over the past couple of sessions we picked up quite a few good positions.  Now we shift more into the mode of riding them and our current positions higher though there will be other buys that come into play, just likely not as many.