Coolhand's Market Analysis

I try not to get too caught up with market fundamentals. I tried that a few years ago and it was entirely too hard to keep up with, but more than that, it became obvious to me over time that there were other factors at play such as sentiment, technical analysis, and central bank intervention that played large roles in what the market does over various time frames. So I settled on technical analysis using the Seven Sentinels as a guide to try and discern market trends. Yes, I do post economic data fairly regularly, but I don't use it in my analysis for the most part.

I bring this up today because of one headline that became reality today, in spite of numerous pundits who would have us think otherwise. That being the double dip in the housing market. Aside from unemployment, this is perhaps the biggest drag on our economic recovery. But that's just my opinion. And the market rallied in convincing fashion today in spite of all that headline represents, front running the 1st of the month ramp up that we've become so accustomed to seeing. So it's not about fundamentals, it's about getting out in front of the herd.

I return you now to my regularly scheduled blog.

Today's early strength was rooted in news of Germany leading a second bailout for Greece. The party over there carried over to here with our market gapping at the open by more than 1% before the Chicago PMI and Consumer Confidence numbers came out, which saw some selling pressure erase the bulk of those early gains, but late afternoon trading saw another rally kick in, which sent the major averages back over 1% by the close.

In case you haven't noticed, treasuries continue to move higher in spite of stock market strength. So the bond vigilantes certainly aren't drinking the kool-aid yet.

The dollar looks to have reversed its ascent over the past few trading days, which has certainly helped stock prices. The dollar index gapped lower at the open and closed in negative territory for the fourth time in the last five sessions.

Tomorrow is the 1st of June, which begs the question on how the market will trade given all the front running over the past few trading days to get in before the next cycle higher begins.

And it should be interesting too, as there is no shortage of economic data being released. On tap is the MBA Mortgage Index, Challenger Job Cuts, ADP Employment Change, ISM Index, Construction Spending, and Auto/Truck Sales.

Here's today's charts:



NAMO and NYMO are now sporting an impressive looking ramp off the low of last Tuesday. Both remain in a buy condition. We've been here before, and usually it means another drop is around the corner. I'm in the camp that says we've got lower prices ahead this month, current rally notwithstanding, but there's reason to believe the upside isn't done just yet.



NAHL and NYHL also keep climbing. Both are on buys.



TRIN remains in a buy condition, while TRINQ just barely flipped to sell. Not much to go on here.



BPCOMPQ finally made a distinct move to the upside today, and crossed that lower bollinger band, which flips it back to a buy condition. We haven't seen a meaningful upside move from this signal in over a month, so today's buy signal could be a warning that another leg higher has begun. But the Seven Sentinels remain in a sell condition for the moment.

So the market seems to have broken through resistance in a big way today, but it could be a fake-out. We'll know a bit more by the end of the week.