SUMMARY:

- Greece deal reached, Greece gets its second bailout installment. Much rejoicing.
- Gold pricing in inflation, Oil pricing in Iran and breaks out.
- Home Depot earnings provide hope for housing or is it just a hot flash?
- Saks earnings nice, Wal-Mart not so nice. The classic turn in retail.
- Some buy on close orders for a change.
- Dow hits 13,000 briefly as the indices move higher, but the move is surely slow, not as exciting, and harder to find ways in.
- Last hour rebound shows the bids are still there but harder for the market to get lathered up.

It may be a shortened week, but the excitement was there. Greece was the word on Tuesday morning. I said the deal would not come until Tuesday because the U.S. markets were closed on Monday, and that is what happened. The deal was struck and the second bailout installment will find its way into the Greek coffers. If everything goes perfectly, Greece will still have a huge debt-to-GDP ratio. If things do not go perfectly, Greece could be in the same situation it is now, and the EU would also find itself down another 130B euro. As of Tuesday, that brings the total bailout amount between Greece, Ireland and Portugal to 386B euro.

It was not that easy, but the deal was struck. Creditors had to take a 55.3% write down on their bonds, but we knew they were going to take a scalding. The deal is done though, and everyone was happy. So much so that European stocks were up on the news, but it was only roll over and close negative on the day. U.S. stocks were up early on the news, but they found it hard to hold the gains as well. Indeed, they were trading lower early in the session. A rebound into lunch brought them to session highs. The SP500 and the Dow were the leaders on the day while the growth indices of NASDAQ, SOX, and the SP600 were struggling. They found it hard to move above the flatline all day. You can see a beautiful intraday head and shoulders pattern bracketing the lunchtime hour. You do not often see them that clearly. Then there is the breakdown and selloff into the close. A double bottom in the last hour rallied stocks in the 30 minutes to the close. We saw that same action last Tuesday. Stocks had a rough day but managed to bounce in the last half hour of trade. Here is the same action a week later, but it was not enough to close everything positive not even close.

SP500, +0.07%; NASDAQ, -0.11%; Dow, +0.12%; SP600, -0.6%; SOX, -1.4%;

JPM downgraded the chip equipment stocks, and they took it on the head for the session, dragging that sector lower. JPM did not reserve its decisions only for the chips. It also downgraded the rails, and they had a so-so day. The airlines really took a hammering as gold surged to the upside. More on that later.

The U.S. investor was not very impressed with the Greece deal either, unable to really advance the ball. Even the indices that were higher were not impressive. The SP500 is still below its post-bear market highs, showing a doji on the candlestick chart. The Dow crossed 13K. Oh, my. Very nice, but it was not that impressive. The Dow hit 13.5K on the peak before peeling back and closing about 35 points off of the 13K level. A lot was said about 13K on the day, of course. It is a milestone, and every 1K points is. It just does not mean a lot. They say it is a “very important psychological point.” We heard that several times, and it is poppycock. 13K does not mean a thing. It is the prior high that bears the meaning. That would be the prior bear market high; we are not even at the prior highs.

We have the Dow breaking through the old highs and holding that move, but it is not looking that impressive. That is where the market is right now. Not all that impressive. Yes, the move has been great. Yes, there was a lateral test and a nice break higher on Thursday. But the moves are very slow now. It is very hard to get a big move. You will have individual large moves, but they are limited to specific stories. We have a lot of stocks that are just hanging on. Moving up and holding their trends. That is great, and we will let them do that. But, as noted, the moves are getting slower and they are getting harder to come by. The entries are getting rather thin. I will discuss that more when we look at the leaders.

WEDNESDAY

We will have a little economic data. We will have the Mortgage Index that will tell us how many more mortgages were written or not. We will have Existing Home Sales, and that is important. We will start to see the Same Store Sales coming out. That will, of course, be very important. We have seen good results from HD and SKS in their quarterly results. Now we will get a look at Same Store Sales, and we will see if they continue to improve. If the consumer feels better then the consumer could be spending more. If they have more jobs, then they should be able to spend more, although wages have been lagging even though jobs have supposedly been showing up. We will see how that turns out, but it looks promising right now.

What will we do on Wednesday? What will we do about this market that has moved up to these highs but is having a hard time making much more headway? I cannot say it will just roll over and fall. I have talked about that. It may look like it is getting tired, but it has not shown that it will fall over yet. If it does not show that, it is difficult take a lot of downside positions. You can take specific ones, but something that can often hurt you when playing these rollovers is getting impatient and moving in too quickly. We have dabbled in downside now and again as the market has moved higher and looked like it was going to sell. But each time we have not had a lot of luck. We have a couple of positions in play now, and we are just dipping a toe in to see because they looked like they were breaking lower.

There are more setups to the downside. We will put more on because there are simply more showing up. That is a sign that things are changing, but we have not seen the change in the indices themselves. Some of these will break down. There are leaders to the downside just as there are leaders to the upside. They break ahead of the rest of the market. We can make money on those, but we will not be running 20 downside plays unless things change quite a bit.

They will talk more about 13K on the Dow tomorrow. Try not to pay too much attention to that. I know you probably do not pay attention anyway since it is annoying. But they will talk about it more and, in theory, that could bring in more retail investors. “Wow, the Dow at 13K. It is on its way back, it is holding, it has moved above it. Yeehaw! Giddyup, let’s go.” If that is the case, maybe we will get more entry points because more money comes into the market. Then more money in the market has to be put to work, and then there are more of the same things we have seen. That is chasing the upside.

Let us not forget that we did see some “buy on close” orders on Tuesday versus “sell on close” orders that we saw two times last week. This is a bit of a positive spin on the market. There is some big money coming in late and buying versus selling. If that is the case, maybe there is more retail money coming to bear on the market. Maybe we will see the markets continue the move upside. But while we may anticipate a test, the markets have not shown that they will produce that yet. Do not get too excited about one hell of a short coming. There may very well be, but it has to show itself first. Otherwise you are just butting your head against the market wall and it will hurt. It might feel better when you stop, but that is about it. With that in mind, we will keep looking for some plays to the upside and some plays to the downside as we watch what key stocks such as BRCM do. That will be important for the market as well as how AAPL will perform and some of the other AAPL-related stocks.

One fellow after hours was talking about a long-term triangle in the SP500 over many years. I am not sure what time period he was looking at, so I went back and started drawing some lines. Well, if this is a triangle, it is possibly the most pathetic triangle I have ever seen. To me, he is really trying to fit something into a preconceived belief. I do not see anything here but a double top, and I am looking back to 2000. Maybe he was coming in a bit closer, and maybe he was saying that this from late 2007 is the triangle. Maybe you can make that argument, but you have two points on the top. And you may have three on the bottom if you throw away the low from 2009. Maybe you do have a triangle there if you stretch and skew your pattern. But this is not a huge triangle that gives me solace and makes me believe it will break out above these prior highs. In all fairness, his target likely was not those highs. It should not be given the pattern. But then again, it is a multiyear triangle, shouldn’t it be?

Those are thoughts to consider. Every time you hear something like this, take it with a grain of salt. This can be conceived as a triangle, but it is not a great triangle. It is not something where I would say, yes, this is a good one. Back in 2011 and even 2010 we saw some great triangles. I do not know if you recall this, but we were playing DECK back then, and here was a triangle. You can see several touches, top and bottom, and it unleashed a tremendous upside move.

Just a bit of a tech reading of patterns. The point is that you can see what you want to see in things. That is why you always have to be a skeptic even with your own analysis. You have to look at it and ask if there is something else there. What am I missing? That is why looking at the MACD right now, you can say it looks weak and looks like it can roll over. That is true, but that in itself is not definitive. Question your own analysis and get the best plays you can. Get the closest to perfect you can. That way you stack more of the odds in your favor.

 

Jon Johnson
Stock Splits & IH Alerts, Editor
InvestmentHouse.com