- No bad news from Europe to start the week, indeed some perceived good news, and stocks continue the relief rally.
- Consumer spending tops expectations as retail stocks drive higher.
- Pending Home Sales decline, but in line
- Obama hires another Princeton Keynesian as his chief economic advisor.
- Going big government does not solve the problems caused by big government. Going back to our roots does.
- November peaks draw near, just a session or less away.

MARKET SUMMARY

Greek bank merger: signs of the bottom or just two bad banks turning into one big crappy bank?

Mondays have been reserved for bad news out of Europe, but this Monday the news was better, or at least that is the way the world’s stock markets received it. Thus if the markets want to see it as positive, who are we to think otherwise? Who cares if it is likely just a couple of crappy banks forming a larger bank in order to avoid nationalization? We care, but again, we are looking at the market not what we think these banks are worth.

Futures rose very early on the news, tracking the rise in markets across the globe. An additional boost came from the July Personal Spending and Income with spending topping expectations at 0.8% versus 0.5% expected. Retail stocks jumped in the pre-market on the news and held nice gains into the close. Retail was just one part of the move as breadth closed in on 7 to 1 on NYSE, signaling that stocks across the board moved well.

NASDAQ 3.32%. SP500 3.82%. DJ30 2.26%. SP600 4.57%. SOX 3.66%.

Thus the market continued its relief rally toward the initial target at the November peaks. It may be short covering driving the move, and frankly we think it is. We will all know more when the market reaches the November peaks, though even that will not be dispositive as there is still resistance from the March and June lows as well. We are playing the bounce and will continue to do so. Indeed Monday we picked up some more upside, had to close some downside, and also banked some nice upside gain. At the same time you have to be ready for a failure at one of these key resistance points as the technical indicators, e.g. volume on the upside, suggest this is still just a relief move.

TUESDAY

Case/Shiller Housing Price Index, Consumer Confidence, and the FOMC minutes are scheduled Tuesday. There is always the Europe wildcard to worry about, however. Monday some decent news from the European theater. That can change at any time.

That keeps you on your toes even as the market hits its stride, apparently, on this second attempt at the relief rally. SP500 and the other indices look ready and indeed DJ30 already made that move on Monday.

We continue playing that move and there are some continuing opportunities upside as well, but new upside buys overall don’t have the same risk/reward they did at Friday’s close. Indeed we started taking some gain on upside positions we picked up last week at the second bottom. Again, there a few that we can still look to play on the upside, but at this juncture let the upside run, see where the indices top out, if they do, take gain, and be ready if things reverse.

As for the downside, we had to close some more downside positions today that broke resistance and held it into the close. Doesn’t mean we have thrown in the downside towel, just that you don’t want to have a modest loss turn ugly on you. As the indices approach the November peak and the March/June lows more downside plays will appear on the report to be ready if the relief bounce runs out of gas at the November level or higher. Still a relief move until it shows otherwise, and there are some great downside setups in progress of, well, setting up. As the relief move continues more of those will appear on the report to get everyone ready for a turn when it comes.