- Market bounces right back from Friday selling: will the tennis match continue or will quarter end window dressing prompt a 3 day rally?
- Personal Income and Spending disappointing. Seeing evidence in the real world.
- ECRI: Cyclical slowdown for at least 2 quarters, hiring may have hit its high for this part of the cycle.
- CNBC top business states: No way NBC will allow Texas to be back to back winner given Perry might enter the Presidential race.
- Is there a reason, this time, for more than one day of bouncing?

MARKET SUMMARY

Buyers volley one back to the sellers.

Friday continued the up one day, down the next action of the recent lateral move, action that is grinding investors out of the market. I talked of the frustration many felt with the market, noting that the sentiment was getting to the point where there could be a decent bounce. But of course that has been the case for over a week and as of yet the bounce isn’t finding real traction.

Maybe that changed Monday. Not because of the rather solid bounce, again, by the indices, but timing. Buyers have stretched this back and forth action out long enough to bring the market to three days ahead of quarter end. Looking at stocks some of the stock names making some very impressive moves Monday, it suggests that some end of quarter window dressing is starting and that may finally be just enough of a push to force some more shorts to cover and drive the market upside in that much wanted relief bounce ahead of Thursday, July 1. AMZN, CMG, AAPL, GOOG, MSFT. Sure looks like some name-grabbing.

As a result the indices put in solid gains: NASDAQ 1.3%; SP500 0.9%; DJ30 0.9%; SP600 0.95%; SOX 0.7%. SOX lagged again. Important to watch it this week. Lagged but it also held the same support and it too is in position to bounce.

Weak economic data to start the week doesn’t upset stocks. Too much.

This action despite weak economic data yet again. May Personal income rose 0.3% when 0.4% was expected. At least it didn’t fall and it build on April’s 0.3% gain. Spending was worrisome at 0.0% versus a whopping 0.1% expected and 0.3% in April. I can attest to the slow consumer. I am traveling this week, and in many places that should have vacationers all over the place the showing is very light. More on this as the week progresses, but this is a disturbing observation even though I expected things to be slower. Gives credence to the ‘stay-cation’ theory that most people are staying near home this summer given the pitiful economic climate.

On top of the weaker numbers, the core PCE rose 0.3%. Even some hard core economists in denial of the economic issues and inflation noted today that this showed there is pass through of price increases to the consumer and that the Fed is going to have to be on guard.

ECRI expanded on last week’s call of a ‘pervasive’ slowdown in the economy similar to the 1970′s. It said the US economy is in a cyclical slowdown that is going to last at least two quarters still to come. That means Q3 and Q4. ECRI said we could pull out of it IF we alter the course and change policies. Good luck; our government cannot even agree on just slashing $100B from our massive debt.

ECRI also noted a very uncomfortable fact. ECRI uses a proprietary measure of employment and hiring to gauge each recovery and slowdown. In the current ‘recovery’ the hiring indicator has already hit the peak levels of other recoveries from prior recessions. What happens in those recoveries is that employment rises steadily then peaks and declines. They all tend to peak at the same level.

What this means is that, incredibly, this weak hiring seen in this recovery is likely at its peak. No matter that the hiring has been the worst in any recovery, it may be over. It makes intuitive sense: hiring improved as the recovery finally did gain some momentum, but then the economic recovery attempt died at the start of 2011 and has declined since. Weekly jobless claims have jumped back above 400K, now for almost three months. The last unemployment report was terrible. As the recovery peaked it makes sense that hiring, for now, has peaked as well even if it is at poor levels. I said it before: those big corporations holding the trillions the government covets are not going to hire for several reasons, the most important being they are not job creators but for the past two decades have been job cutters.

TUESDAY

More important data with Case/Shiller and Consumer Confidence, the latter a half hour into trade. Confidence is off its lows but still at levels that strongly suggest recession, not recovery.

The back and forth action could resume yet again, but as noted over the weekend, the indices have been building a lateral shelf to try and extend the relief rally from. With quarter end on Wednesday and the action in some big names on Monday, it looks as if the market will yield another upside session, maybe two. Of course it could keep on going; the market has a way of going against your gut feelings. So, we see it as a relief rally, but have to be open enough to see if it turns into something more.

Thus we picked up some good plays that can rally for us over the next two days and make us money. We are also looking at some more upside from plays that can make us some great money in just a short period of time. The market may crap out the move, but if it rallies another two sessions these plays can produce solid returns and of course the market may just go further than anyone thinks, as it often does.

Still treating the existing plays the same. Those that were struggling but are recovering in the bounce, let them rally as far as they will or won’t. Then if they stall out below key levels and the overall market move is slowing, sell them.

For those moving as we want, let them continue their moves and look at the targets and how they are moving toward them. If they get another couple days upside but are not at the target, don’t fret about taking some gain if the market overall waffles. Indeed, given how the market reacted to start June after a run higher in late May, it likely behooves us to take gains on Wednesday if there is a continuing good run regardless of how strong the move is.

We are playing the rally, not some new breakout. Thus if we get the rally, even if our plays don’t make it to the target, it is better to lock in some solid gain versus letting it slip away, or if there is a June-like reversal on the first day, letting them get ripped away. So, just as we did on Tuesday last week when there was a good upside move for a couple of sessions, take some interim gain ahead of the new month.

I am traveling this week, seeing some sights in this great country, talking with a lot of small businesses, and talking with a lot of investors. The reports may be a bit shorter but the staff continues to crank out plays and analysis for you even if my part has to be shortened a bit. You know, however, I cannot keep away from the market. Have rugged laptops, will travel.