- Market overcomes midmorning selling pressure, posts solid albeit low volume gains.
- Japanese GDP, M&A overcome more weak manufacturing data.
- Dollar and bonds sell, all other markets rise.
- Indices work through near resistance, head toward November peak.

MARKET SUMMARY

Relief move is tested at lunch, but it passes. Now on to the next resistance.

Futures were up Sunday evening as Australia and the Pacific Rim markets posted nice gains on the heels of the upside finish in the US. It did not hurt one bit that Japan’s economy shrank only 0.3% versus a much larger decline anticipated. On top of that, GOOG advanced the M&A mania a bit with its high premium acquisition of MOBE. Nothing like some good takeover speculation to gin up the buy side.

It was enough to help the market overcome some more very disconcerting economic data. The New York manufacturing index turned in its second straight negative performance, meaning manufacturing is contracting and the first reading was not just a fluke. The issue was it came in at -7.7 when just -0.4 was expected. That doubled up the July number and again it looks as if manufacturing, that just hung on to expansion on a national level in July, is going to turn negative nationwide on the next reading.

On top of that, Warren Buffett once again put in his two cents worth (must be up to $5 worth by now if you count all the times he butts into the debate) regarding taxation. Mr. Buffett believes we are ‘coddling billionaires’ by not raising their taxes. Never mind the government is rife with waste, the latest affront being a junket by a large group of DC staffers heading to Maui for a meeting. Bad enough, but factor in they had to get their a week in advance to ‘prepare.” Prepare what, their suntans? Mr. Buffett, don’t tell anyone to pay another nickel in taxes UNTIL the federal government cleans up, even modestly, its profligate ways with our money. Why should we pay more money just because Washington refuses to be prudent with the money it has already taken from us?

Now Mr. Buffett may have been truly talking about billionaires. Problem is, the Obama Administration has a different definition of millionaires and billionaires. Obama repeatedly of late has said millionaires and higher levels, specifically those making that much per year (not just net worth) should pay more taxes. Yet ALL of his proposals go all the way back to $250K to start the tax hikes. I know of NO billionaires who make $250K per year and damn few millionaires who make that amount yearly. They all pull in annual incomes much larger. What Mr. Obama is suggesting does more harm for people TRYING TO BECOME millionaires than it helps the lower income levels. This is the US; everyone, at least it used to be everyone, strived to BECOME a millionaire. The Administration’s programs and regulations, however, have done more to destroy small businesses and thus our millionaire-making machine, inhibiting the average citizen’s ability to rise above his or her current economic level. That is the huge disconnect, but it is a familiar pattern: talk about one thing to the common folk, then do something completely different.

Back to the market after that digression. Futures were up, stocks opened higher, they survived a midmorning half-hearted selling attempt, and rallied slow and steady, emphasis on steady, to close at session highs.

NASDAQ 47.22, 1.88%. SP500 25.68 2.18%. DJ30 213.83, 1.90%. SP600 2.84%. SOX 1.98%.

A good move for a relief rally, indeed for any upside move, but for now a relief rally nonetheless. Impressive gains, solid breadth, but another day of lagging volume. All indices moved through the 10 day EMA and toward the November peak with DJ30 leading the way higher, already moving through the November high.

Nice price gains in line with our relief rally scenario. We picked up some new positions, took some gain on AAPL and NTES, and generally let the upside work. If this holds there is still plenty of upside to the SP500 November peak (1225) and even 1260.

Housing starts, Industrial Production, Capacity Utilization, and the meeting between France and Germany to decide the fate of the EU. Okay, maybe not that grand, but it is rather ironic that France and Germany play such an important role in the continent’s future. Really, it could very well be the fate of the EU.

Any story could stall the market’s relief move. There is a solid bounce underway but until it is proved otherwise it is a relief bounce, and the weaker volume only allows for easier upset if a big news event hits.

Barring any such jolt (in this world economy could that even be possible?) the market is trading very technically. There is an immense level of overhead supply at SP500 1260. There is some lesser resistance at the November high. With the lower volume bounce you play the upside bounce as we are doing but watch for stalling. The market looked as if it picked up strength Monday. No, it really just picked up momentum. That is great for a trades but expecting a breakout or not being mindful of key resistance is not playing smart.

At this stage we have picked up most of the upside we want to get for now and will let it rally for us (already took some AAPL, NTES gain), let those upside positions that are struggling move up as much as they can, and be ready for the downside, just in case as we say. Thus we take what the market gives as it trades in this range.