- More weak economic data but stocks respond with an intraday reversal.
- Leaders post solid moves though SP500, NASDAQ face key tests at the 50 day EMA
- Bond market is screaming that economic trouble is coming. Long-term economic trouble.
- GDP second look is as weak, indeed internally weaker, than the first iteration.
- Jobless claims bounce right back up. Hardly the ‘reversal’ trumpeted last week
- So there are no more jobs to lose?  Just as Heinz: it is making huge profits but is cutting 1,000 jobs to fight rising costs.
- Three-day weekend likely to slow the Friday action but with leaders on the move there could still be some buys.

MARKET SUMMARY

Market overcomes weak economic data, posting a second day of rebound.

The market got another dose of bad economic news on Thursday. There was a weaker-than-expected Q2 GDP report, and the jobless claims number bounced right back up. So much for the reversal that was trumpeted last week. Nonetheless, the market handled the news with relative dispatch. The futures were higher premarket, and when the reports were issued they took a beating and fell to negative. Stock prices still managed to recover as the market opened and bottomed mid-morning. Once again, you see that mid-morning is a crucial period for any session in the market.

Stocks chopped around after the open, but they found purchase with a double bottom and rallied into the afternoon. Indeed, they mostly held the gains into the close. It was not an exact close at the session peak, but I cannot complain about that. There was just some late erosion in the prices that still finished out the market in very good shape. NASDAQ, +0.8%; SP500, +0.4%; Dow, +0.1%; SP600, +1.15%; SOX, +1%; NASDAQ 100, +0.65%. The NASDAQ 100 fared worse than the overall NASDAQ. AAPL struggled. It bounced up in its trading range, but it has bumped up into some resistance. That does not mean it will crash, but it does mean it is having trouble moving higher in the range.

FRIDAY

Friday is likely to be slowed somewhat by the three-day weekend for Memorial Day. Some economic data is coming out. Personal Income and Spending is important. Of course there is the PCE, the Price Index where the Fed will say it shows there is no inflation. Yeah, right. There is the final Michigan Sentiment for May and then Pending Home Sales for March. They are not expected to be strong, but the key is watching the Spending and now it comes out. We will also watch the Sentiment and whether people are feeling better or worse with respect to those high-energy prices and the falling wages we saw in the second iteration of the Q2 GDP report released on Thursday.

As discussed, there are some leaders moving quite well. I want to look at COH again just to show that the breaks are occurring even as the overall outlook is not that good. I explained earlier that that can happen. In times of malaise or sideways movement in the economy (even a down movement in the economy) you can get sharp rallies to the upside and you can get sharp selloffs. That is the way things work, and that keeps it working for us as traders and investors.

The action is likely to slow some on Friday given the three-day weekend. We already saw volume starting to back off, and it has not been strong all week. We could very well see those leaders move higher that we were just looking at. I went through a whole series of stocks that performed very well on Thursday. Again, there were stocks that performed well on Wednesday as the market bounced back.

SP500 and NASDAQ are bumping up to the 50 day EMA, and that makes things a bit interesting for Friday and next week on the shortened Memorial Day week. I do not anticipate the two indices breaking through the 50 day EMA on this move. Of course I did not really anticipate these two days to the upside. I was expected more of a downside decline that would have tested near the bottom of the range. Perhaps after this little bounce to the resistance, they will come back and make that test. We will just have to see how it works out.

We have leaders moving, and I like that. We have some stocks that we did not enter on Thursday that we maybe could have, such as ZMH. It backed off a bit. We will see if we get a bit of a pullback on Friday that might give a better entry point. Or maybe we will wait until Tuesday and see what happens. I also have a little concern about the Tuesdays after any holiday. The sellers can come back in and take things down.

Overall the market remains positive. It is back in the trading range. That is not necessarily a great thing after failing that breakout, but buyers have shown up once more. They have not totally abandoned stocks and have picked up good buys on the dips. Indeed, that has been driving those leader stocks higher once more. That will be our focus. We will look at the leaders that are doing well, and we may look at some downside again. I am looking for stocks that have bounced up to resistance, similar to the indices, and are ready to fade back down again. We can make some money off of that as the indices and stocks work in this revisit to the trading range.

Friday may be slow, but we could get a chance to pick up some partials on stocks that started to bounce on Thursday and maybe want to give back a bit on the open on Friday. We will see how it plays out. We may be able to pick up some good stocks at a bit of a discount that started some good moves.